Business Date Chosen Five Years Ago 08/21/2006 1-month Nominal T-bill Rate on th

Question

Business Date Chosen Five Years Ago 08/21/2006
1-month Nominal T-bill Rate on that Date 5.15%
3-month Nominal T-bill Rate on that Date 5.11%
6-month Nominal T-bill Rate on that Date 5.18%
1-year Nominal T-note Rate on that Date 5.07%
5-year Nominal T-note Rate on that Date 4.77%
10-year Nominal T-note Rate on that Date 4.82%
20-year Nominal T-bond Rate on that Date 5.04%
30-year Nominal T-bond Rate on that Date 0%

*Assume that two U.S. Treasury securities were purchased at par ($1000) on your selected date five years ago with a 10-year T-note and a 20-year T-bond. Also assume that for each of the two securities the reported nominal rate that you found above was the coupon rate at issuance. Assuming semi-annual coupon payments, calculate the current value? Also calculate the Gain or Loss on the Bond over the 5 years?

Explanation / Answer

current value =1589.21 gain=556.71

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