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A Treasury bond with 12 years to maturity is currently quoted at 112:12. The bond has...

A Treasury bond with 12 years to maturity is currently quoted at 112:12. The bond has a coupon rate of 10.7 percent. What is the yield value (IN BASIS POINTS) of a 32nd for this bond?

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Answer #2
Face value $100
Coupen annually 10.70%
Coupen amount $10.70
Maturity 12 years
Bond Price $112.12
YTM :
Price of bond = Coupen * PVAF( YTM, Maturity) + Redemption value * PVF( YTM,Maturity)
Here bond price is more than face value hence YTM be less than Coupen rate
Therefore lets assume YTM be 9%
Price of bond = 10.70*PVAF(9%,12) + 100*PVF(9%,12)
10.70*7.160+100*.355
$ 112.112

it is closes to $112.12 therefore YTM = 9%

answered by: anonymous
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