Hello Could someone please explain that why, for the PV of the bonds in part i) 0.04 has been multiplied by D (a_n)? Thanks
I understand that D=0.04, but not sure why D is being multiplied by 4bn and 5b in the equation for the PV.
£4bn and £5bn are the nominal amounts of each bond. The annual coupons are 4% of the nominal amount, so they'll be 4% * 4bn = £160m and 4% * 5bn = £200m for each bond, respectively.
