Question

On October 20, 2010, the 8 year treasury note has a bid price of 99:18, and an ask price of 99:20. The treasury note has a face value of $10,000, and a coupon rate of 5% made semiannually. The treasury note matures on October 19, 2015. What is the ask yield-to-maturity?

Answer 1

Since the ask price is quoted as 99:20, that means it is being quoted as percent of face value here 99:20 means that( 99 + (20/32)) % 99+(20/32) 99.625 % hence the price of treasury notes is 99.625% of face value Price (0.99625*10000) 9,962.50 Face value Coupon 10000 (0.05*10000*(1/2)) 250 Number of periods = 5*2 = 10 Use the financial calculator to calculate the yield Yield = 2.543 Multiply it by 2 to get the annual yield 2.543*2 5.09 %