Question

You find the following Treasury bond quotes. To calculate the number of years until maturity, assume that it is currently May 2016. The bonds have a par value of $1,000.

Rate	Maturity Mo/Yr	Bid	Asked	Chg	Ask Yld
??	May 19	103.5371	103.5249	+.3209	5.859
5.901	May 24	104.4861	104.6318	+.4209	??
6.128	May 34	??	??	+.5314	3.891

In the above table, find the Treasury bond that matures in May 2034. What is the asked price of this bond in dollars? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

Asked price            $

If the bid-ask spread for this bond is .0631, what is the bid price in dollars? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

Bid price            $

Answer 1

Answer a.

Face Value = $1,000

Annual Coupon Rate = 6.128%
Semiannual Coupon Rate = 3.064%
Semiannual Coupon = 3.064% * $1,000
Semiannual Coupon = $30.64

Time to Maturity = 18 years
Semiannual Period to Maturity = 36

Annual Yield = 3.891%
Semiannual Yield = 1.9455%

Asked Price = $30.64 * PVIFA(1.9455%, 36) + $1,000 * PVIF(1.9455%, 36)
Asked Price = $30.64 * (1 - (1/1.019455)^36) / 0.019455 + $1,000 / 1.019455^36
Asked Price = $1,287.60

Answer b.

Bid Price = $1,287.60 - (0.5314/100 * 1,000)
Bid Price = $1,282.29