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Q. A Treasury bond with a face (or promised) value of $1,000 sold in the market for $1287.19 yesterday. At this price, the yi
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Answer #1

People are buying to get the annual periodic coupons along with the par value at maturity. Coupon is coupon rate multiplied by par value. Coupon =6.75%*1000=67.5. The price includes not only the present value of $ 1000 at end of the maturity but also the present value of the coupons.
The YTM of 2.43% discounts the coupons too. Since the Coupons are received at lot earlier.
The PV of Coupons =67.5*((1-(1+2.43%)^-7)/2.43% =429.73
This value is comparable to PV of Par Value

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