Today is 1 July 2021. Jane is planning to purchase a corporate bond with a...
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Today is 1 July 2021. Jane is planning to purchase a corporate bond with a coupon rate of j2 = 2.83% p.a. and face value of 1000. This corporate bond matures at par. The maturity date is 1 January 2024. The yield rate is assumed to be j2 = 4.43% p.a. Assume that
this corporate bond will not default in the first six-month period (i.e., from 1 July 2021 to 31 December 2021),
this corporate bond has a 3% chance of default in the second six-month period (i.e., from 1 January 2022 to 30 June 2022) and
this corporate bond has a 4.86% chance of default in any six-month period during the term of the bond except the first 12-month (i.e., 4.86% chance of default in any six-month from 1 July 2022 to 1 January 2024). Assume also that, if default occurs, Jane will receive no further payments at all.
(b) What is the expected coupon payment on 1 July 2023? Round your answer to four decimal places.
a.
11.3814
b.
13.0584
c.
12.4238
d.
12.2278
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