To calculate the number of years until maturity, assume that it is currently May
ID: 2733618 • Letter: T
Question
To calculate the number of years until maturity, assume that it is currently May 2013.
Rate
Maturity
Mo/Yr
Bid
Asked
Chg
Ask
Yld
??
May 24
103.4664
103.5392
+.3067
6.079
5.424
May 29
104.5004
104.6461
+.4341
??
6.183
May 39
??
??
+.5457
4.111
Required:
In the above table, find the Treasury bond that matures in May 2029. What is your yield to maturity if you buy this bond? (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).)
Yield to maturity
To calculate the number of years until maturity, assume that it is currently May 2013.
Explanation / Answer
Answer: The bond asked price is 104.6461 , so the dollar price is:
Dollar price = 104.6461% × $1,000
Dollar price = $1,046.461
So the bond price equation is:
P= $1,046.461 = $27.12 (PVIFAR%,32) + $1,000(PVIFR%,32)
Using a spreadsheet, financial calculator, or trial and error, we find:
R= 2.50%
This is the semiannual interest rate, so the YTM is:
YTM = 2 × 2.50%
YTM = 5.00%
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