(30 points) 5. Your bank purchased a $10,000 T-bond with a settlement date of January 1, 2022 that matures on December 31, 2051, thus the T-bond has exactly 30-years to maturity on the settlement date where, the next coupon payment will be on June 1, 2022. The coupon rate on the T-note is 1.80% and the market determined YTM is 1.77%. a Since the bond pays interest semi-annually, what is the bond's price (both clean and dirty) on 1/1/22, the settlement date? Use both the formula and the Excel Price function: =Price(settlement maturity rate, yld redemption frequence, basis) to show that your formula determined price and the Excel determined price are the same. (This part is done for you) Vo= (0.0180/2) {[1-((1 + 0.0177/2)-2030)/0.0177/2} + 100%(1 + 0.0177/2)-230) Vo=(0.0090) {[1-((1 +0.00885)6/0.008853 +1 +0.00885) 60 Vo= 0.417568 +0.589392 = 1.006959 or = 100.6959% Clean and Dirty PRICE ON 1/1/2022 using Excel PRICE(settlement, maturity,rate,yld, redemption, frequence, basis) 100.6959461 Settlement date 1/1/2022 Maturity date 1/1/2052 Annual Coupon rate Annual Yield Redemption amount per $100 face value Number of coupon payments per year Day Count basis Thus, using either the formula or Excel, the Clean and Dirty T-bond price is 100.6959% of par value. 1.80% 1.77% 100 2 0 b. Three months later, (April 1, 2022), what is the dirty and clean price of the T-bond if the market yield (YTM), because of the FED's "Tapering increases to 2.10%? Remember, you have held the bond for 89 days or 0.243836 years and the T-note has 29.756164 years or 59.512329 semi-annual periods remaining to maturity (assume there are 184 days during each semi-annual period). Calculate the Clean Price for the T-Bond using both the formula and Excel as above Clean Price Clean PRICE ON 4/1/2022 PRICE(settlement, maturity, rate,yld, redemption, frequence, basis) Settlement date Maturity date Annual Coupon rate Annual Yield Redemption amount per $100 face value Number of coupon payments per year Day Count basis 4/1/2022 1/1/2052 1.80% 2.10% 100 2 0 c. To calculate the Dirty Price, please calculate the accrued interest on the T-Note given that you have held it for 89 days? (Assume there are 184 days during each semi-annual period). Accrued interest over the 89 days is calculated as: d. Given that Clean price + Accrued interest = Dirty price, what is the Dirty price in both percent and in dollar price of the T-bond on April 1, 2022? Dirty Price =Clean Price + Accrued Interest = Or Dollar price=S (30 points) 5. Your bank purchased a $10,000 T-bond with a settlement date of January 1, 2022 that matures on December 31, 2051, thus the T-bond has exactly 30-years to maturity on the settlement date where, the next coupon payment will be on June 1, 2022. The coupon rate on the T-note is 1.80% and the market determined YTM is 1.77%. a Since the bond pays interest semi-annually, what is the bond's price (both clean and dirty) on 1/1/22, the settlement date? Use both the formula and the Excel Price function: =Price(settlement maturity rate, yld redemption frequence, basis) to show that your formula determined price and the Excel determined price are the same. (This part is done for you) Vo= (0.0180/2) {[1-((1 + 0.0177/2)-2030)/0.0177/2} + 100%(1 + 0.0177/2)-230) Vo=(0.0090) {[1-((1 +0.00885)6/0.008853 +1 +0.00885) 60 Vo= 0.417568 +0.589392 = 1.006959 or = 100.6959% Clean and Dirty PRICE ON 1/1/2022 using Excel PRICE(settlement, maturity,rate,yld, redemption, frequence, basis) 100.6959461 Settlement date 1/1/2022 Maturity date 1/1/2052 Annual Coupon rate Annual Yield Redemption amount per $100 face value Number of coupon payments per year Day Count basis Thus, using either the formula or Excel, the Clean and Dirty T-bond price is 100.6959% of par value. 1.80% 1.77% 100 2 0 b. Three months later, (April 1, 2022), what is the dirty and clean price of the T-bond if the market yield (YTM), because of the FED's "Tapering increases to 2.10%? Remember, you have held the bond for 89 days or 0.243836 years and the T-note has 29.756164 years or 59.512329 semi-annual periods remaining to maturity (assume there are 184 days during each semi-annual period). Calculate the Clean Price for the T-Bond using both the formula and Excel as above Clean Price Clean PRICE ON 4/1/2022 PRICE(settlement, maturity, rate,yld, redemption, frequence, basis) Settlement date Maturity date Annual Coupon rate Annual Yield Redemption amount per $100 face value Number of coupon payments per year Day Count basis 4/1/2022 1/1/2052 1.80% 2.10% 100 2 0 c. To calculate the Dirty Price, please calculate the accrued interest on the T-Note given that you have held it for 89 days? (Assume there are 184 days during each semi-annual period). Accrued interest over the 89 days is calculated as: d. Given that Clean price + Accrued interest = Dirty price, what is the Dirty price in both percent and in dollar price of the T-bond on April 1, 2022? Dirty Price =Clean Price + Accrued Interest = Or Dollar price=S