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( 2 0 points ) You can buy or sell a 3 . 5 % coupon $ 1 , 0 0 0 par U .

(20 points) You can buy or sell a 3.5% coupon $1,000 par U.S. Treasury Note that matures in 6 years. The first coupon payment pays 6 months from now, and the Note pays coupons semi-annually until maturity. It also pays par on maturity. The Yield to Maturity of the Note right now (treat this as your discount rate) is 3.000%.
(a) What are the cash flows associated with this Note?
(b) Which of these cash flows are annuity dues, ordinary annuities, or single cash flows?
(c) What is the present value of all payments associated with this Note?
(d) If interest rates moved up, what would happen to the value of this Note?
(e) If a stranger was willing to buy or sell you the bond for $1000, would you buy or sell it - and why?
(Hint: assume no altruism here.)
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