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4. The US treasury has two bonds outstanding, both with 2.0% coupon rate. The first has one year to maturity, the second 20 years to
4. The US treasury has two bonds outstanding, both with 2.0% coupon rate. The first has one year to maturity, the second 20 years to maturity. Assume semi-annual coupon payment, and 3.0% yield. a. Calculate the two bonds prices. b. Market conditions have changed, and the bonds yield has dropped to 2.6%. Price both US treasury bondsand evaluate the each bond capital gain rate. What can you conclude about the relative loss and the bonds maturity?
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