Question

You find the following Treasury bond quotes. To calculate the number of years until maturity, assume that it is currently May 2019 and the bond has a par value of $1,000.

Rate	Maturity	Bid	Asked	Chg	Ask Yld
??	May 25	103.5553	103.6435	+.3106	2.469
5.574	May 33	104.5043	104.6500	+.4377	??
6.198	May 43	??	??	+.5496	4.171

n the above table, find the Treasury bond that matures in May 2025. What is your yield to maturity if you buy this bond?

Coupon rate

Answer 1

Par Value = $1,000

Current Price = Asked Quote * Par Value
Current Price = 103.6435% * $1,000
Current Price = $1,036.435

Annual YTM = 2.469%
Semiannual YTM = 1.2345%

Time to Maturity = 6 years
Semiannual Period = 12

Let Semiannual Coupon be $C

$1,036.435 = $C * PVIFA(1.2345%, 12) + $1,000 * PVIF(1.2345%, 12)
$1,036.435 = $C * (1 - (1/1.012345)^12) / 0.012345 + $1,000 * (1/1.012345)^12
$1,036.435 = $C * 11.090093 + $863.0928
$173.3422 = $C * 11.090093
$C = $15.63

Semiannual Coupon = $15.63

Annual Coupon = 2 * Semiannual Coupon
Annual Coupon = 2 * $15.63
Annual Coupon = $31.26

Coupon Rate = Annual Coupon / Par Value
Coupon Rate = $31.26 / $1,000
Coupon Rate = 0.0313 or 3.13%