BOB just sold $4 million face value of 4.75% US Treasury Notes that mature on May...

BOB just sold $4 million face value of 4.75% US Treasury Notes that mature on May 15, 2030, and has a yield to maturity of 5%. SHOW YOUR WORK STEP BY STEP FOR CREDIT!

a. What is the flat price of the bond today (4/1/2020)?

b. What is the invoice price of the bond?

Expert Solution

Assumptions:

1) Coupons are paid once every year on May 15.

2) 4/1/20 is taken as 1st April, 2020.

Period	Discounting Factor [1/(1.05^period)]	Discounting Factor Annuity (Sum of discounting factor & all previous discounting factors)
1	0.952380952	0.952380952
2	0.907029478	1.859410431
3	0.863837599	2.723248029
4	0.822702475	3.545950504
5	0.783526166	4.329476671
6	0.746215397	5.075692067
7	0.71068133	5.786373397
8	0.676839362	6.463212759
9	0.644608916	7.107821676
10	0.613913254	7.721734929
11	0.584679289	8.306414218

Flat Price(i.e. Price as on May 15 2019) = PV of All Coupons + PV of Maturity Value = [Coupon*Annuity Factor] + [Maturity Value*Discounting Factor] = [4000000*4.75%*8.3064] + [4000000*0.58468] = 1578216 + 2338720 = $3916936

Invoice Price = Flat Price - Accrued Interest till April 1, 2020 = 3916936 + (4000000*4.75%*10.5/12) = 3916936 + 166250 = $4083186

jeff jeffy answered 1 year ago

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?

~In Excel~~ Question 1. A US-Treasury bond with face value of $1,000 pays interest at an...

~~~In Excel~~~~ Question 1. A US-Treasury bond with face value of $1,000 pays interest at an annual rate of 5%. Coupons are paid twice per year. a. If this bond has 4 years to mature, what is the price of the bond if current yield to maturity is 4%? Calculate this by finding the value of coupons and principal separately. (12) b. If the coupon were instead paid once per year, what would be the price of the bond? ~~~In...

On April 1, 1989, Saxe, Inc. purchased $200,000 face value, 9% U.S. Treasury Notes for $198,500,...

On April 1, 1989, Saxe, Inc. purchased $200,000 face value, 9% U.S. Treasury Notes for $198,500, including accrued interest of $4,500. The notes mature July 1, 1990, and pay interest semiannually on January 1 and July 1. Saxe uses the straight-line method of amortization. The notes were sold on December 1, 1989 for $206,500, including accrued interest of $7,500. In its October 31, 1989 balance sheet, the carrying amount of this investment should be

Problem 1 : Suppose you buy a 3-year US Treasury bond with a face value of...

Problem 1 : Suppose you buy a 3-year US Treasury bond with a face value of $1,000. It pays three annual coupons at a rate of 2.50% exactly 1, 2, and 3 years from the day you purchase it. (a) Assume that when you purchase the bond, its yield to maturity equals 3%. What is its value on the day of purchase? (b) Is this bond issued at par, a discount, or premium? (c) Next assume the moment after you...

Treasury bonds with a face value of 1 million won, maturity of 3 years, interest rate...

Treasury bonds with a face value of 1 million won, maturity of 3 years, interest rate of 5%, interest payment once a year, discount rate of 6%. 1. How many years is the Macaulay Duration of the above bonds? 2. How many years is the modified duet of the above bond? 3. If the rate of interest is 10% (one-time annual payment), face value is 10,000 won, the present price of the bond is 9,600 won, and the price...

You own a bond with a $20,000 face value and a 4.75% coupon with semiannual payments....

You own a bond with a $20,000 face value and a 4.75% coupon with semiannual payments. The bond matures in 18 months and the yield to maturity is 3%. What is the Macaulay duration of your bond?

We observe the following US Treasury Bonds with semi-annual coupon payments, each with a face value...

We observe the following US Treasury Bonds with semi-annual coupon payments, each with a face value of $10000. A bond maturing in 6 months, with a 3% coupon rate, is trading for $10099.25 A bond maturing in 12 months, with a 5% coupon rate, currently costs $ 10293.75 A bond maturing in 18 months, with a 5% coupon rate, costs $10231.25 A bond maturing in 24 months, with a 4% coupon rate, costs $10071.00 (a) Use these bonds to and...

On Jan 1 ’07 SSS buys 100 US Treasury Bonds (face value $1000 each) for the...

On Jan 1 ’07 SSS buys 100 US Treasury Bonds (face value $1000 each) for the Trading Portfolio. The bonds carry an annual interest coupon of 4% paid semiannually Jan 1 and July 1. Journalize the purchase. On July 1 the bonds pay interest. Journalize the receipt of the interest payment. On Aug 1, SSS sells 50 of the bonds at 98 On December 31 SSS makes an adjusting entry for accrual of interest to be received January 1 2008....

A Treasury bill that settled January 15, 2020 has face value $1 million and matures April...

A Treasury bill that settled January 15, 2020 has face value $1 million and matures April 14, 2020. Its yield on a bank discount basis was 3.00%. Show that the actual number of days elapsed between settlement and maturity is 90 days. [Hint: 2020 is a leap year.] Calculate the bond equivalent yield (actual/365 basis). Calculate the coupon equivalent yield (30/360 basis). Calculate the CD equivalent yield (actual/360 basis). Explain why the bond equivalent yield in part b is 365/360...

A.) What is the price of a Treasury STRIPS with a face value of $100 that...

A.) What is the price of a Treasury STRIPS with a face value of $100 that matures in 12 years and has a yield to maturity of 6.5 percent? (Do not round intermediate calculations. Round your answer to 2 decimal places.) B.) A Treasury STRIPS is quoted at 93.333 and has 4 years until maturity. What is the yield to maturity? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)

Question