Suppose that it is August 13, 2013 and that Pinnacle Partners plans to buy a Tre

Question

Suppose that it is August 13, 2013 and that Pinnacle Partners plans to buy a Treasury bond that matures in May 2042. The bond pays coupons semi-annually on May 15 and November 15 of each year. The Ask quote for this bond is 112:18 and it pays an annual coupon rate of 5.00%. If Pinnacle Partners buys the bond on August 13, there have been 90 days since the last coupon payment (out of the 184 days in the current semi-annual period). How much must Pinnacle Partners pay for the bond?

a. $1,125.63

b. $1,137.86

c. $1,138.40

d. $1,150.09

e. $1,151.17

PLEASE show all work!

Explanation / Answer

Answer:

Maturity: May 2042

Frequency of payments

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