1. Assume that a bond was issued on November 15, 2016 and it pays coupons semiannually on May 15 and November 15, with its first coupon on May 15, 2017. Its maturity date is November 15, 2026 and its annual coupon rate is 4.40%. The settlement date for a trade is 8/26/2019 and you are buying $100,000 of face value. Calculate the accrued interest assuming it is a U.S. Treasury bond.

$4,400.00

$2,200.00

$1,234.44

$1,231.52

2. Now calculate accrued interest assuming it is a US Corporate bond.

$2,200.00

$4,400.00

$1,234.44

$1,231.52

3.Use the same US Treasury bond as in the first question. Coupon rate = 4.40%, Maturity Date is 11/15/2026, Issue Date is 11/15/2016, First Coupon Date is 5/15/2017, Coupon rate is 4.40% paid semiannually, and the settlement date is 8/26/2019. if the price is 101, what is the yield to maturity. Use the Bond Price Yield Calculator in Excel to answer this question.

4.4000%

4.2369%

4.4500%

2.2000%

4.The price yield graph for a conventional bond is downward sloping meaning that as yield to maturity increases, price falls. Why is that?

Price falls because as the yield increases the amount of interest paid at each coupon date falls.

Price falls because as yield increases accrued interest goes up.

Price falls because the present value of the cash flows falls due to the higher discount rate (yield).