You find the following Treasury bond quotes. To calculate the number of years un
ID: 1175184 • Letter: Y
Question
You find the following Treasury bond quotes. To calculate the number of years until maturity, assume that it is currently May 2016. The bonds have a par value of $1,000.
In the above table, find the Treasury bond that matures in May 2034. What is the asked price of this bond in dollars? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
Asked price $
If the bid-ask spread for this bond is .0631, what is the bid price in dollars? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
Bid price $
Mo/Yr Bid Asked Chg Ask
Yld ?? May 19 103.5371 103.5249 +.3209 5.859 5.901 May 24 104.4861 104.6318 +.4209 ?? 6.128 May 34 ?? ?? +.5314 3.891
Explanation / Answer
Answer a.
Face Value = $1,000
Annual Coupon Rate = 6.128%
Semiannual Coupon Rate = 3.064%
Semiannual Coupon = 3.064% * $1,000
Semiannual Coupon = $30.64
Time to Maturity = 18 years
Semiannual Period to Maturity = 36
Annual Yield = 3.891%
Semiannual Yield = 1.9455%
Asked Price = $30.64 * PVIFA(1.9455%, 36) + $1,000 * PVIF(1.9455%, 36)
Asked Price = $30.64 * (1 - (1/1.019455)^36) / 0.019455 + $1,000 / 1.019455^36
Asked Price = $1,287.60
Answer b.
Bid Price = $1,287.60 - (0.5314/100 * 1,000)
Bid Price = $1,282.29
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.