Question

You purchase a 10-year T-note which has a par value of $1,000 and a yield-to-maturity of 8%. Its coupon rate is 9%. The price of the T-note is ___.

	A.	$1,067.95
	B.	$993.46
	C.	$1,103.28
	D.	$1,090.03

You observe that the current yield curve is as follows: r0.5=5.5%, r1=5.6%, r1.5=5.8%, r2=6%, r2.5=6.3%, r3=5.9%. Based on the expectations theory, what is the 6-month forward rate (quoted per annum) six months from today?

	A.	5.7%
	B.	5.4%
	C.	5.9%
	D.	5.3%

Answer 1

K = Nx2

Bond Price =∑ [(Semi Annual Coupon)/(1 + YTM/2)^k]     +   Par value/(1 + YTM/2)^Nx2

k=1

K =10x2

Bond Price =∑ [(9*1000/200)/(1 + 8/200)^k]     +   1000/(1 + 8/200)^10x2

k=1

Bond Price = 1067.95

Using Calculator: press buttons "2ND"+"FV" then assign

PMT = Par value * coupon %/coupons per year=1000*9/(2*100)

I/Y =8/2

N =10*2

FV =1000

CPT PV

Using Excel

=PV(rate,nper,pmt,FV,type)

=PV(8/(2*100),2*10,-9*1000/(2*100),-1000,)