Question

A 10-year U.S. Treasury bond with a face value of $1,000 pays a coupon of 5.5% (2.75% of face value every six months). The reported yield to maturity is 5.2% (a six-month discount rate of 5.2/2 = 2.6%). (Do not round intermediate calculations. Round your answers to 2 decimal places.)

a. What is the present value of the bond?

Present value            $

b. If the yield to maturity changes to 1%, what will be the present value?

Present value            $

c. If the yield to maturity changes to 8%, what will be the present value?

Present value            $

d. If the yield to maturity changes to 15%, what will be the present value?

Present value            $

Answer 1

a)	we have to use financial calculator to sovle this problem
	Put in calculator
	FV		1,000
	PMT	=1000*2.75%	27.5
	I	=5.2%/2	2.60%
	N	=10*2	20
	compute PV		($1,023.16)
	Therefore present value =			$1,023.16
b)	we have to use financial calculator to sovle this problem
	Put in calculator
	FV		1,000
	PMT	=1000*2.75%	27.5
	I	1%/2	0.50%
	N	=10*2	20
	compute PV		($1,427.22)
	Therefore present value =			$1,427.22
c)	we have to use financial calculator to sovle this problem
	Put in calculator
	FV		1,000
	PMT	=1000*2.75%	27.5
	I	=8%/2	4.00%
	N	=10*2	20
	compute PV		($830.12)
	Therefore present value =			$830.12
1)	we have to use financial calculator to sovle this problem
	Put in calculator
	FV		1,000
	PMT	=1000*2.75%	27.5
	I	=15%/2	7.50%
	N	=10*2	20
	compute PV		($515.76)
	Therefore present value =			$515.76