Given for T-note,
Face value = $1000000
coupon rate = 4% semi-annual
So coupon payment = 2% of 1000000 = $20000 semiannually
time to maturity = 5 year, so total of 10 coupons will be paid.
Yield to maturity = 7.7%, so semiannual rate = 3.85%
So price is sum of Present values of all the coupons and PV of face value at maturity
So, Price = 20000/1.0385 + 20000/1.0385^2 + 20000/1.0385^3 + ... + 20000/1.0385^9 + 20000/1.0385^10 + 1000000/1.0385^10 = $848821.66
it can also be solved using financial calculator, with inputs
FV = 1000000
N = 10
I/Y = 3.85
PMT = 20000
compute for PV, we get PV = $848821.66
So, T-note's current price = $1848821.66
Back to Assignment Attempts: 1 Keep the Highest: 1/2 5. Valuing semiannual coupon bonds Bonds often...
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