Locate the Treasury bond in Figure 7.4 maturing in February 2026. Assume a $10,0

Question

Locate the Treasury bond in Figure 7.4 maturing in February 2026. Assume a $10,000 par value. Is this a premium or a discount bond? premium What is its current yield? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Current yield 4.8001 % What is its yield to maturity? (Do not round intermediate calculations. Enter your answer as a percent rounded to 3 decimal places, e.g., 32.162.) Yield to maturity 2.3228 % What is the bid-ask spread in dollars? (Do not round intermediate calculations. Round your answer to 2 decimal places, e.g., 32.16.) at is the bid ask spread in dollars? (Do not round intermecaions. Round your answer to $7.81 Bid-ask spread rev: 09_29_2015_QC_CS-27486

Explanation / Answer

1. Since the coupon rate is higher than the yield, it is a premium bond.

2.

Current yield = Annual coupon/Price = 6/130.2813 = 0.0461 = 4.61%

3.

From the given table,

YTM = 2.962%

4.

Bid ask spread = 130.3594 - 130.2813 = 0.0781

Bid as spread in dollars = 0.0781*10000/100 = $7.81

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