what is the price in dollar of the February 2000 Treasury note with semiannually payment if...

what is the price in dollar of the February 2000 Treasury note with semiannually payment if its par value is $100,000? what is the current yield of this note?

Treasury notes and bonds. use the information in the following table
today is February 15, 2008
type,issue, price, coupon,maturity, YTM,current, rating

type.                     bond
issue.                   Feb 2000
price.                        -
coupon rate.       6.00%
Maturity date.     2-15_2010
YTM.                    3.819%
current yield.            -
rating.                  AAA

Expert Solution

Price of the Treasury note = Present value of all the future coupon payments and the par value of the note.
Given:
Coupon rate = 6%
Coupon C = 6%*100000 / 2 = $3000
YTM r = 3.819%/2 = 1.9095%
Number of periods n = 10 * 2 = 20
Par Value FV = 100000

Price = C*PVIFA(r%,n) + FV*PVIF(r%,n)
         = C*[ 1- (1+r)^-n ] / r + FV / (1+r)ⁿ = 3000 * [ 1 - (1 + 0.019095)^-20 ] / 0.019095 + [100000 / (1+0.019095)²⁰ ]
          = 3000 * [ 1 - (1.019095)^-20 ] / 0.019095 + [100000 / (1.019095)²⁰ ]
          = 3000* [ 1 - (1.4598)^-20 ] / 0.019095 + [100000 / 1.4598 ]
          = 3000* [ 1- 0.685025 ] / 0.019095 + 68502.53
         = 3000*16.49514 + 68502.53
         = 49485.43 + 68502.53
         = $117987.953

Bond Price = $117987.95

b) Current yield = Annual interest payment / Bond Price
                       = 6%*100000 / 117987.95
                       = 6000 / 117987.95
                       = 5.09%

Current yield of the note = 5.09%

jeff jeffy answered 1 year ago

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