Question

# Treasury notes and bonds. Use the information in the following​ table: What is the price in...

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 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 / 1.0229954

= \$ 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%

Feel free to ask in case of any query relating to this question

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