Reference no: EM132389763

Today is 1 july 2019, Jenny will use part of the sale proceeds of these instruments to purchase a corporate bond with a coupon rate of j2 = 3.7% p.a. and face value of 1000 on 1 July 2019. This corporate bond matures at par. The maturity date is 1 July 2029. The yield rate is assumed to be j2 = 3.35% p.a. Assume that this corporate bond has a 5% chance of default in the first six-month period (i.e., from 1 July 2019 to 31 December 2019) and this corporate bond has a 3% chance of default in any six-month period during the term of the bond except the first six-month (i.e., from 1 January 2020 to 1 July 2029). Assume also that, if default occurs, Jenny will receive no further payments at all.

Calculate the purchase price for 1 unit of this corporate bond. Round your answer to two decimal places. Draw the detailed contingent cash flow diagram associated with this corporate bond, from the perspective of Jenny.