Question

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%. semiannual rate=0.71% https://www.treasury.gov/resource-center/data-chart-center interest-rates/Pages TextView.aspx?data=yield 2 Yr 9/23/2020 0.08 What is the asked price (market price) for the bond? Date 1 Mo 2 Mo 0.09 3 Mo 0.11 6 Mo 0.11 1 Yr 0.13 3 Yr 0.15 5 Yr 0.28 7 Yr 0.46 10 Yr 0.68 20 Yr 1.21 30 Yr 1.42 0.14 Hint: YTM from US Treasury Yield Curve = 1.42% or semiannual rate = 0.710% Also, 1-(1+ra)-N VB = INT +M(1+rd)) id 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

1 Q: Assuming today is 9/23/20, your firm wants to purchase a ¢10,000. ? sol firm wants to purchase a $10,000 value per U. S treasury band. Fov $ 10,000 Nopes 30 x2 pmt = 60, $ 10,000 X2% 12 $ 200 (2 $ 100, Rate = 104201.12 = 0o +10% market price of the bond can be caluclated by using the following excel formulas: = PV ( Rate, n pez, PTV, FV) = PV ( 0.71%,:60, -100. – 10.000) $ 11,412,830 market price of the bond =$12, 412.83

by Uf Tora Sury Band rate Jump immedially to 2.00% N.M FOV = 10,000 = 30X 2 = 60 PONT = 10,000 x 2% 12 = $200/2 = $ 100, Rate 202.12 = 10% calulated by new price of the bond ban be using the follwing excel formula? =Pvc rate, nper ipmt, pre 1 of 60,-100 - 10000) 10,000.11 /- fu) New price of the Bond = $10,000/- Gain I loset. = ($10,000 - $ 11,412,83) /$11.412.83 = $ 1.4 2.83 / R11,412.83 12.38% o