Below, you will find Treasury bond quotes. To calculate the number of years unti

Question

Below, you will find Treasury bond quotes. To calculate the number of years until maturity, assume that it is currently May 2013.

In the above table, find the Treasury bond that matures in May 2038. What is the asked price of this bond in dollars? (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).)

If the bid-ask spread for this bond is .0644, what is the bid price in dollars? (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).

Below, you will find Treasury bond quotes. To calculate the number of years until maturity, assume that it is currently May 2013.

Explanation / Answer

Explanation: 1: The coupon rate of the bond is 6.148 percent and the bond matures in 25 years. The bond coupon payments are semiannual, so the asked price is:

P = $30.74(PVIFA 1.9855%,50) + $1,000(PVIF 1.9855%,50 )

P = $968.9127 + 374.1782 =1343.09

2: The bid-ask spread is .0641. We also know the bid price must be less than the asked price, so the bid price is:

Bid price = $1343.09 - (.0644/100)($1,000)

Bid price = 1342.446

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