Attempts 2 Keep the Highest: 2/4 ttention: Due to a bug in Google Chrome, this p
ID: 2816320 • Letter: A
Question
Attempts 2 Keep the Highest: 2/4 ttention: Due to a bug in Google Chrome, this page may not function correctly. Click here to learn more. 7. Valuing semiannual coupon bonds Aa Aa Bonds often pay a coupon twice a year. For the valuation of bonds that make semiannual payments, the number of periods doubles, whereas the amount of cash flow decreases by half. Using the values of cash flows and number of periods, the valuation model is adjusted accordingly. Assume that a $1,000,000 par value, semiannual coupon U.S. Treasury note with five years to maturity (YTM) has a coupon rate of 3%. The yield to maturity of the bond is 9.90%. Using this information and ignoring the other costs involved, the value of the Treasury note is Based on your calculations and understanding of semiannual coupon bonds, complete the following statements: Assuming that interest rates remain constant, the T-note's price is expected to The T-note described is selling at a When valuing a semiannual coupon bond, the time period variable (N) used to calculate the price of a bond reflects the number of periods remaining in the bond's lifeExplanation / Answer
Time , N, = 5*2 = 10 periods
Coupon = 3/2 % of 1000000 = 15000
Ytm = 9.9/2 = 4.95%
Thus using financial calculator and feeding values
You will get price of Treasury note be 732952.10
Ans to blanks are :
Increases
Discount as price is lower than face value
Semiannual
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