Question

In: Finance

Department of Treasury auctioned a 20-year bond in August. Its coupon rate was 1.125% and similar...

Department of Treasury auctioned a 20-year bond in August. Its coupon rate was 1.125% and similar bonds yield at 1.213%. What should the price be?

Solutions

Expert Solution

Answer : Calculation of price of Bond :

Price = [Coupon * [email protected]% for 20 years] + [Face Value * [email protected]% for 20th year]

= [11.25 * 17.6643623666] + [1000 * 0.78573128438]

= 198.724076624 + 785.73128438

= 984.4554 or 984.46

jeff jeffy answered 2 years ago
Next > < Previous

Related Solutions

Suppose that you invest in a two-year Treasury bond with a coupon rate of 6% and...
Suppose that you invest in a two-year Treasury bond with a coupon rate of 6% and $1,000 par. Suppose that you buy this bond at a price of exactly $1,000. You intend to hold this bond to maturity and reinvest the coupons until the bond matures. You expect to reinvest the coupons in an account that pays an APR of 1.23%, with semi-annual compounding. What is the effective annual rate of return on your investment? Hint: see Example 8 in...
Nathan purchased a 5-year Treasury bond with a coupon rate of j2 = 3.50% p.a. and...
Nathan purchased a 5-year Treasury bond with a coupon rate of j2 = 3.50% p.a. and a face value of $100 that matures at par. Coupons can be reinvested at j2 = 3.2% p.a. for the first four and a half years. a. [2 marks] Calculate Nathan’s purchase price for this bond at a yield rate of j2 = 3.1% p.a. (rounded to three decimal places). b. [4 marks] Assume that Nathan held this bond to maturity to earn a...
Nathan purchased a 6-year Treasury bond with a coupon rate of j2 = 3.50% p.a. and...
Nathan purchased a 6-year Treasury bond with a coupon rate of j2 = 3.50% p.a. and a face value of $100 that matures at par. Coupons can be reinvested at j2 = 3.2% p.a. for the first five and a half years. a. Calculate Nathan’s purchase price for this bond at a yield rate of j2 = 3.1% p.a. (rounded to three decimal places). b. Assume that Nathan held this bond to maturity to earn a total realised compound yield...
Wan purchased a 7-year Treasury bond with a coupon rate of j2 = 4.5% p.a. and...
Wan purchased a 7-year Treasury bond with a coupon rate of j2 = 4.5% p.a. and a face value of $100 that matures at par and is subject to a 30% tax on interest and capital gain. The purchase price was $94.230. a. Use the approximate bond yield formula to estimate the net yield rate. Give your answer in j2 form, rounded to 3 decimal places. b. Use linear interpolation to calculate the net yield rate. Give your answer in...
Consider a 20-year bond with an annual coupon of 10%. The coupon rate will remain fixed...
Consider a 20-year bond with an annual coupon of 10%. The coupon rate will remain fixed until the bond matures. The bond has a yield to maturity of 8%. Which of the following statements is correct? 1) The bond should currently be selling at its par value. 2) If market interest rates decline, the price of the bond will also decline. 3) If market interest rates remain unchanged, the bond’s price one year from now will be higher than it...
The Treasury Department auctioned $10 billion in 3-month bills in denominations of $10,000 at a discount...
The Treasury Department auctioned $10 billion in 3-month bills in denominations of $10,000 at a discount rate of 3.000%. What would be the effective rate of interest?
You are considering a 20-year, $1,000 par value bond. Its coupon rate is 11%, and interest...
You are considering a 20-year, $1,000 par value bond. Its coupon rate is 11%, and interest is paid semiannually. The data has been collected in the Microsoft Excel Online file below. Open the spreadsheet and perform the required analysis to answer the question below. Open spreadsheet If you require an "effective" annual interest rate (not a nominal rate) of 11.28%, how much should you be willing to pay for the bond? Do not round intermediate steps. Round your answer to...
You are considering a 20-year, $1,000 par value bond. Its coupon rate is 11%, and interest...
You are considering a 20-year, $1,000 par value bond. Its coupon rate is 11%, and interest is paid semiannually. The data has been collected in the Microsoft Excel Online file below. Open the spreadsheet and perform the required analysis to answer the question below. Open spreadsheet If you require an "effective" annual interest rate (not a nominal rate) of 7.63%, how much should you be willing to pay for the bond? Do not round intermediate steps. Round your answer to...
Suppose you purchase a 20 year treasury bond with a? 6% annual coupon ten years ago...
Suppose you purchase a 20 year treasury bond with a? 6% annual coupon ten years ago at par. Today the? bond's yield to maturity has risen to? 8% (EAR). If you sell this bond? now, the internal rate of return you will earn on your investment will be closest? to: A.) 5.0 B.) 6.0 C.) 4.9 D.) 8.0
A 20-year semi-annual bond has just been issued with its coupon rate set at the current...
A 20-year semi-annual bond has just been issued with its coupon rate set at the current market yield of 6 percent. How much would the price of the bond change (in percentage terms) if the market yield suddenly fell by 50 basis points? How much would the price change if the yield rose by 50 basis points?
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT