Google just sold a $10 million face value of 3.75% US Treasury Notes that mature on...

Google just sold a $10 million face value of 3.75% US Treasury Notes that mature on May 15, 2030, and has a yield to maturity of 4.5%.

What is the flat price of the bond today (4/6/2020)?

What is the invoice price of the bond?

Solutions

Expert Solution

Flat price of bond is calculated using PRICE function in Excel.

Settlement = settlement date = date today

Maturity = maturity date

rate = coupon rate

yld = yield to maturity

redemption = redemption value (% of par)

frequency = coupons per year. This is 2, since bonds usually pay coupons semiannually.

By inputting the values into this function, we get the bond price per $100 of par value.

As the par value of this bond is $10,000,000, we multiply the answer by 100,000 ($10,000,000 / $100)

Flat price of the bond is $9,395,869.47

Invoice price = flat price + accrued interest

accrued interest = face value * coupon rate * (number of days since last coupon payment / 360)

The last coupon payment was on November 15, 2019. Number of days since last coupon payment = 142 days

accrued interest = $10,000,000 * 3.75% * (142 / 360)

accrued interest = $147,916.67

Invoice price = flat price + accrued interest

Invoice price = $9,395,869.47 + $147,916.67

Invoice price = $9,543,786.14

jeff jeffy answered 1 year ago

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