A Parcel of 90 Day BABs with a Face Value

question 62

Essay

A parcel of 90 day BABs with a face value of $10 million is purchased at 3.25% p.a.and sold 40 days later when yields have increased to 3.5% p.a.Calculate
(i)the holding period yield achieved, (ii)the amount of interest earned on the investment and (iii)any capital gains or losses that resulted.