Question

1.

Suppose today is Dec 31^st, 2019 and the U.S. Treasury notes have been issued with a December 2024 maturity, $1000 face value, and a 2.2% coupon rate with semiannual coupons.

The first coupon payment will be paid on Jun. 30^th 2020. If the yield to maturity is 3% today, then what is price of the U.S. Treasury notes today?

A. $1037.68

B. $970.06

C. $963.11

D. $837.93

2. Suppose a five-year, $1000 bond with semiannual coupons has a price of $936 and a yield to maturity of 6%. What is the bond's coupon rate as in APR?

______%

3.Here is the information of a Treasury bond (semi-annual coupon bond)

that matures in December 2020:

Maturity date    Coupon Rate     Bid                  Ask                  Ask Yield

12/31/2020 2.375 100.236 100.242 1.758

Which of the following statements is false?

Group of answer choices

A. The bond will pay a coupon of about $11.88 every six months.

B. If investors place a market buy order, they will pay $1002.42 for the bond. (For this question, don’t worry about the invoice price)

C. The bondholders will get an annual rate of return by 2.375% when holding the bond until maturity.

D. The bond’s yield is less than coupon rate, which suggests the bond is trading at a premium.

4.A semiannual coupon bond currently has an ask price of 115% of its $1,000 face value. The bond’s coupon rate is 6%. If the last coupon payment was made one month ago, what is the invoice price of the bond?

Answer 1

1.
=2.2%*1000/3%*(1-1/1.015^(5*2))+1000/1.015^(5*2)=963.1112618

2.
=(936-1000/1.03^10)*6%/1000*1/(1-1/1.03^10)=4.50%

3.
C. The bondholders will get an annual rate of return by 2.375% when holding the bond until maturity.

4.
=115%*1000+6%*1000/2*1/6=1155