Roy Orbison wants to invest in a 10 year Treasury bond with a 41/4% coupon...

Roy Orbison wants to invest in a 10 year Treasury bond with a 4 1/4% coupon interest rate. He'd like to earn a yield to maturity of 4.65%. The most he should pay per $100 in face value to earn this yield is:

Expert Solution

coupon rate = 4.25%

yield to maturity = 4.65%

face value of bond = $ 100

maturity period = 10 years

current price of bond = 100*4.25%*PVIFA(4.65%,10years) + 100*PVIF(4.65%,10year)

= 4.25*7.854683 + 100*0.634757

= 33.3824 + 63.4757

= 96.858

the most he should pay per $ 100 in face value to earn this yield is $ 96.858.

jeff jeffy answered 2 years ago

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