Treasury notes and bonds. Use the information in the following table: What is the price in dollars of the February 2000 Treasury note with semiannual payment if its par value is $100,000?What is the current yield of this note?
Today is February 15, 2008 |
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Type |
Issue Date |
Price |
Coupon Rate |
Maturity Date |
YTM |
Current Yield |
Rating |
Note |
Feb 2000 |
– |
7.50% |
2-15-2010 |
4.599% |
– |
AAA |
What is the price in dollars of the February 2000 Treasury note?
________% (Round to the nearest cent.)
What is the currrent yield of the February 2000 Treasury note?
________% (Round to three decimal places.)
The value of the bond is computed as shown below:
The coupon payment is computed as follows:
= 7.5% / 2 x $ 100,000 (Since the payments are semi annually, hence divided by 2)
= $ 3,750
The YTM will be as follows:
= 4.599% / 2 (Since the payments are semi annually, hence divided by 2)
= 2.2995%
N will be as follows:
= (2010 - 2008) x 2 (Since the payments are semi annually, hence multiplied by 2)
= 4
So, the price of the bond is computed as follows:
Bonds Price = Coupon payment x [ [ (1 - 1 / (1 + r)^{n} ] / r ] + Par value / (1 + r)^{n}
= $ 3,750 x [ [ (1 - 1 / (1 + 0.022995)^{4} ] / 0.022995 ] + $ 100,000 / 1.022995^{4}
= $ 3,750 x 3.780214968 + $ 91,307.39568
= $ 105,483.20
Current yield will be as follows:
= Annual coupon payment / Current price
= $ 7,500 / $ 105,483.20
= 7.11%
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