Question

3 Yr 0.14 Assuming today is 9/23/20, your firm wants to purchase a $10,000 par value U.S. Treasury bond with 30 years to maturity, annual coupon rate of 2.00% with semiannual coupon payments. The market annual yield to maturity on 30-year "T" bonds, found in the US Treasury Yield curve, is 1.42%. htts://www.treasury.gov/resource center/data.chart.center interest rates Pares TextView.aspxdate wield Date 1 Mo 2 Mo з Мо 6 Mo 1 Yr 2 Yr 5 Yr 7 Yr 10 Yr 20 Yr 30 Yr 9/23/2020 0.08 0.09 0.11 0.11 0.13 0.15 0.28 0.46 0.68 121 1.42 What is the asked price (market price) for the bond? Hint: YTM from US Treasury Yield Curve = 1.42% or semiannual rate=0.710% Also, 1 (1 ra) N VB INT M(ra) N rd VB= B. If the 30 US Treasury Bond rate jumps immediately to 2.00%, what is the new price for the 30-year "T" bond in part A, above? How much, in percent, would you lose or gain if you had purchased the bond in part A. VB- Gain/Loss%=(price@ r= 2.00%) - (price@r=1.42%)/(price@r=1.42%)=

Answer 1

Pageno Anawezi a) Market price of the bond: FV = $10,000 Nper = 30x2 5 GO PMT = $10000 x 2% 2 200 2 2 =$100 Rate = 1.42% a -0.41070 Marketprice = pv (rate, mpeg, ponit, fw) = pv (0.41%, 60,-$100-$10,000 Market price = $11,412.83 New price of the bond! fv = $10,000 Npen = 30x2= 60 PMT= $10,000 x 2% $100 2 Rate=37: = 1%

Pageno@ New Poice = pv (ratempes, omt, fu) Epv (12., 60, -100, -10,000) $ 10,000 i New price - $ 10,000 Gain Ilose % = ($10,000 - $ 11,412.83 11,412.83 -$ 1,412.83 11,412.83 = -0.123793134 =-12.38% Gainllossy -12-38%