Question

b. 10% с.20% d.30% 17. Turm back to Figure 2.3 and look at the Treasury bond maturing in Feb LO 2-1 a How much would you have to pay to purchase one of these bonds? b What is its coupon rate? 20 c th uet yield Ge,coupon income as a fraction of bond C. What is the current yield ( the bond?

Answer 1

17.

a.To purchase these bonds,

we need to pay ask price = 121.4141% of $1,000

=>$1,214.14

b. coupon rate = 4.5%.

c.current yield = coupon income / bond price *100

here,

coupon income = face value * coupon rate

=>$1,000 * 4.5% =>$45.

now,

current yield = $45 / $1214.14 * 100

=>3.71%..........(rounded to two decimals).

Answer 2

ANSWER :

17.

Treasury bond maturing in Feb. 15, 2036 (bonds are of par value $1000)

Quotes are as per par value of $100. 

a.  Amount to be paid per bond = 121.4141 / 100 * 1000 = 1214.141 ($)

b. Coupon rate is 4.5 % 

c. Current yield is = 4.5 /100 * 1000 / 1214.141 * 100 = 3.71 %