Please answer in electronic text. Thank you! 5. P You are looking at a Treasury bond that has a coupon of 4% and makes semiannual coupon payments. It matures in 10 years. a. What are the bond's c...

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Question

Please answer in electronic text. Thank you!

5. P You are looking at a Treasury bond that has a coupon of 4% and makes semiannual coupon payments. It matures in 10 years.

Answer 1

Answer #1

As per rules I am answering the first 4 subparts of the question

1: Bonds cash flows:

Per semiannual period: CF1 to CF 20 = 4%*1000/2 =$ 20

CF 20: $1000

2: Interest rate per period = YTM/2

= 3.6%/2 = 1.8%

3: Present discounted value of coupons = Coupon*(1-1/(1+rate)^number of terms)/rate

= 20*(1-1/(1+0.018)^20)/ 0.018

=$333.43

4: PV of principal = FV/(1+r)^n

= 1000/1.018^20

=$699.91

Price of the bond = 333.43+ 699.91 = 1033.34

Answer 2

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