Problem • Assume that it is May 15, 2010, and the U.S. Treasury has just issued securities with a May 2015 maturity, $1,000 par value, and a 2.2% coupon rate with semiannual coupons. • Since the origi...
Problem
•
Assume that it is May 15, 2010, and the U.S. Treasury has
just issued securities with a May 2015 maturity, $1,000 par
value, and a 2.2% coupon rate with semiannual coupons.
•
Since the original maturity is only five years, these would
be called “notes” as opposed to “bonds.”
•
The first coupon payment will be paid on November 15,
2010.
•
What cash flows will you receive if you hold this note until
maturity?
##I need to know how to solve this problem with BAll Plus calculator.##
Homework Answers
(Nov 2010) Cash flow 1 = 2.2%*1000/2 = 11
(May 2011) CF 2= 11
(Nov 2011) CF 3 = 11
(May 2012) CF 4 = 11
(Nov 2012) CF 5 = 11
(May 2013) CF 6 = 11
(Nov 2013) CF 7 = 11
(May 2014) CF 8 = 11
(Nov 2014) CF 9 = 11
(May 2015) CF 10= 11 + 1000 = 1011
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