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In: Finance
a. Suppose a 7.2% semi-annual coupon 20-year Treasury issue with a par value of $100 issue...
a. Suppose a 7.2% semi-annual coupon 20-year Treasury issue with a par value of $100 issue is priced in the market based on the on-the-run 20-year Treasury yield. Assume further that this yield is 5.60%, so that each cash flow is discounted at 5.60% divided by 2. What is the market price of the Treasury issue based on this assumption? b. Suppose also that the price of the same Treasury issue would be $115.285 if it is calculated based on the prevailing Treasury spot rate curve. What action would a dealer take and what would the arbitrage profit be? Can this situation persist in the long run?
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Please give positive vote , let me know if you need anyfurther information regaring the question
jeff jeffy answered 2 years agoRelated Solutions
a. Suppose a 7.2% semi-annual coupon 20-year Treasury issue with a par value of $100 issue...
a. Suppose a 7.2% semi-annual coupon 20-year Treasury issue with
a par value of $100 issue is priced in the market based on the
on-the-run 20-year Treasury yield. Assume further that this yield
is 5.60%, so that each cash flow is discounted at 5.60% divided by
2. What is the market price of the Treasury issue based on this
assumption?
b. Suppose also that the price of the same Treasury issue would
be $115.285 if it is calculated based on...
8) a. Suppose a 7.6% semi-annual coupon 20-year Treasury issue with a par value of $100...
8) a. Suppose a 7.6% semi-annual coupon 20-year Treasury issue
with a par value of $100 issue is priced in the market based on the
on-the-run 20-year Treasury yield. Assume further that this yield
is 6.20%, so that each cash flow is discounted at 6.20% divided by
2. What is the market price of the Treasury issue based on this
assumption?
b. Suppose also that the price of the same Treasury issue would
be $108.462 if it is calculated based...
If a semi-annual bond has par-value is $100, 5% coupon and 8years of remaining maturity,...
If a semi-annual bond has par-value is $100, 5% coupon and 8
years of remaining maturity, what would be the market price if
yield is 6%
100, 106.78, 93.71, or none of the above
A 20 yr maturity bond with par value of $1000 makes semi-annual coupon payment at a...
A 20 yr maturity bond with par value of $1000 makes semi-annual
coupon payment at a coupon rate of 8%. What is the effective annual
yield if the bond price is $950?
The answer is 8.7%
Please show work, USING THE BA CALCULATOR. Thank you.
What is the YTM of a four-year semi-annual coupon bond with a par value of $1,000...
What is the YTM of a four-year semi-annual coupon bond with a
par value of $1,000 and a 6% coupon rate when the bond is priced at
$940?
An 8-year $1,000 par Treasury bond pays a 7 percent semi-annual coupon. The bond has a...
An 8-year $1,000 par Treasury bond pays a 7 percent semi-annual
coupon. The bond has a conversion factor of 1.025. The risk-free is
6 percent and the annual yield on the bond is 7 percent. The bond
just made a coupon payment. The price of a 15-month futures
contract is closest to:
A. $1 049.32
B. $979.00
C. $983.32
A bond with a par value of $1,000 has a 6% coupon rate with semi-annual coupon...
A bond with a par value of $1,000 has a 6% coupon rate with
semi-annual coupon payments made on July 1 and January 1. If the
bond changes hands on November 1, which of the following is true
with respect to accrued interest?
The buyer will pay the seller $20 of accrued interest
The seller will pay the buyer $20 of accrued interest
The buyer will pay the seller $10 of accrued interest
The seller will pay the buyer $10...
21. If a 3-year, semi-annual bond ($1,000 par value) has an annual coupon rate of 8...
21. If a 3-year, semi-annual bond ($1,000 par
value) has an annual coupon rate of 8 percent, and
an annual yield to maturity of 6 percent, then
calculate Macaulay's duration of the bond using
the table format demonstrated in the video
(not the equation)
Suppose a 2 year 5% (annual coupon) bonds are selling at par (that is, for $100...
Suppose a 2 year 5% (annual coupon) bonds are selling at par
(that is, for $100 of face value, the price is equal to $100) and 1
year zero coupon bonds has a yield to maturity of 7%.
(a) What are the 1-year and 2-year interest rates, r1 and r2,
respectively?
(b) What should be the price of a two year 8% coupon bond with a
face value of $100?
(c) What are the Durations of 5% coupon bonds and...
Assume a par value of $1,000. Caspian Sea plans to issue a 10.00 year, semi-annual pay bond that has a coupon rate of 7.86%
Assume a par value of $1,000. Caspian Sea plans to issue a
10.00 year, semi-annual pay bond that has a coupon rate of 7.86%.
If the yield to maturity for the bond is 8.11%, what will the price
of the bond be?
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