Determine the price of the security: A US Treasury bond that has a fixed coupon rate...

Question

Question

Determine the price of the security:

A US Treasury bond that has a fixed coupon rate of 3.3%, a maturity date of 21 years, and a yield to maturity of 4.2%.

Answer 1

Answer #1

Assuming face value to be $1000

Coupon = 3.3% of 1000 = 33

Price = Coupon * [1 - 1 / (1 + r)ⁿ] / r + FV / (1 + r)ⁿ

Price = 33 * [1 - 1 / (1 + 0.042)²¹] / 0.042 + 1000 / (1 + 0.042)²¹

Price = 33 * [1 - 0.421481] / 0.042 + 421.480903

Price = 33 * 13.774264 + 421.480903

Price = $876.03

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Answer 2

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