You are considering buying a 10-year U.S. Treasury bond at the upcoming Treasury

Question

You are considering buying a 10-year U.S. Treasury bond at the upcoming Treasury auction. Assume that the bond has the following features: coupon rate: 2.6%, with semi-annual coupon payments Face value: $1,000 matures in 10 years In the auction, the annual yield to maturity determined by the auction is 2.61%. What is the price that you will pay for this bond? Do not round at intermediate steps in your calculation. Round your answer to the nearest penny. Do NOT include a minus sign! Do not type the $ symbol.

Explanation / Answer

Computing Present value using Financial calculator PMT 13 (since coupon rate is 2.6% of 1000 but semi annual payment of Interest) N= 20 (twice payment in year therefore 10*2=20) I/Y= 1.31% (2.61/2=1.305% since bond is semi annual) FV= 1000 Press CPT and PV PV= 999.125

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