Question

In the section headed “Bond Yield and Performance At-A-Glance”, look at the interest rates listed under the

“Treasury Yield” tab and use the rate for the 10-year maturity Treasury Bond. If this bond is a Discount Bond

with a face value of $1000, what price did the saver pay to earn the interest rate (% yield) shown? (You can use

the “easy formula” for a discount bond, or you can use the “correct” (present value) formula).

For Questions 3-5, please use: https://finra- markets.morningstar.com/BondCenter/Default.isp 3. In the section headed “Bond Yield and Performance At-A-Glance”, look at the interest rates listed under the "Treasury Yield" tab and use the rate for the 10-year maturity Treasury Bond. If this bond is a Discount Bond with a face value of $1000, what price did the saver pay to earn the interest rate (% yield) shown? (You can use the "easy formula” for a discount bond, or you can use the "correct” (present value) formula).

Answer 1

Bond yield and performance glance has a good interest rate ab and also this graph shows a proper treasure yied and since there is a discount bound for the face value of $1000

Normal interest rate=1000/10*100=100*10=1000 units

Price is important when you intend to trade bonds with other investors. A bond's price is what investors are willing to pay for an existing bond.In the online offering table and statements you receive, bond prices are provided in terms of percentage of face (par) value.

Here the bonds are given for each and every month and there are currently 5 to 6 months bonds are given and it can also be accurately calculated and it is calculated from 1 month to 30 years

The price investors are willing to pay for a bond can be significantly affected by prevailing interest rates. If prevailing interest rates are higher than when the existing bonds were issued, the prices on those existing bonds will generally fall. That's because new bonds are likely to be issued with higher coupon rates as interest rates increase, making the old or outstanding bonds generally less attractive unless they can be purchased at a lower price. So, higher interest rates mean lower prices for existing bonds.

If we buy  buy a corporate bond with a coupon rate of 5%. While you own the bond, the prevailing interest rate rises to 7% and then falls to 3%

1. The prevailing interest rate is the same as the bond's coupon rate. The price of the bond is 100, meaning that buyers are willing to pay you the full $20,000 for your bond.

2. Prevailing interest rates rise to 7%. Buyers can get around 7% on new bonds, so they'll only be willing to buy your bond at a discount. In this example, the price drops to 91, meaning they are willing to pay you $18,200 ($20,000 x .91). At a price of 91, the yield to maturity of this bond now matches the prevailing interest rate of 7%.

3. The prevailing interest rate drops to 3%. Buyers can only get 3% on new bonds, so they are willing to pay extra for your bond, because it pays higher interest. In this example, the price rises to 104, meaning they are willing to pay you $20,800 (20,000 x 1.04). At a price of 104, the yield to maturity of this bond now matches the prevailing interest rate of 3%.