Question

1. At 04/1954: ___2.29_____ 

2. At 09/1976: ___7.59_____ 

3. At 09/1981: ___15.32_____ 

4. For the 

   Latest Month: ____2.89 as of 7/2018____

B. Assume that a $1000 U.S. Treasury bond was purchased at par on each of first three

     dates above. Also assume that for each of the three bonds the reported nominal rate

     that you found above was the coupon rate at issuance.

     Assuming semi-annual coupon payments, calculate the value of each bond after 5

     years based on the then 5-year nominal rates on U.S. Treasuries available at     

     http://www.federalreserve.gov/releases/h15/data.htm

     to determine the gain or loss on each of the three bonds after 5 years?

  1. At 04/1959: ________ 

    2. At 09/1981: ________

    3. At 09/1986: ________ 

    Which bond would you have preferred to purchase?  

    04/1954? ________

    09/1976? ________ 

    09/1981? ________ 

   Why?

Answer 1

Series Description	Market yield on U.S. Treasury securities at 5-year   constant maturity, quoted on investment basis
Unit:	Percent:_Per_Year
1959-04	4.12
1981-09	15.93
1986-09	6.92
Date	Yield	Coupon	New Price after 5 yrs	Gain for investor in 5 yrs
04-1954	2.29%	2.29%	$918.07	0.68%
09-1976	7.59%	7.59%	$719.75	2.26%
09-1981	15.32%	15.32%	$1,350.00	19.74%
Clearly the biggest gain is for investor buying 09/1981 bond and hence it is preferable to buy that bond