Assume that the zero-coupon yield curve at date 0 is as follows: S1=8%, S2=8.4%, and S3=8.9%....

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Assume that the zero-coupon yield curve at date 0 is as follows: S1=8%, S2=8.4%, and S3=8.9%....

Assume that the zero-coupon yield curve at date 0 is as follows: S1=8%, S2=8.4%, and S3=8.9%. What would we expect the current price of a treasury note with a maturity of 3 periods and a coupon rate of 5% per period to be?

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Answer 1

Answer #1

Please refer to below spreadsheet for calculation and answer. Cell reference also provided.

A В E 1 $1,000.00 Treasury note Par value Annual coupon rate 2 5% 3 4 6 Zero-coupon yield curve 7 Cash Flow of T-note PV of C

Cell reference -

A В C D E 1 Treasury note Par value Annual coupon rate 2 1000 0.05 6 Zero-coupon yield curve 7 Cash Flow of T-note PV of CF Y

Hope this will help, please do comment if you need any further explanation. Your feedback would be highly appreciated.

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Answer 2

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