Question
A 10-year U.S. Treasury bond with a face value of $1,000 offers a coupon of 5.5% per annum (pa), to be paid semi-annually. The reported
A 10-year U.S. Treasury bond with a face value of $1,000 offers a coupon of 5.5% per annum (pa), to be paid semi-annually. The reported yield to maturity is 5.2% pa, compounded semi-annually.
(a) What is the PV of this bond?
(b) What is the PV if the yield to maturity increases to 5.8% pa?
(c) Explain your observations.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
a To calculate the present value PV of the bond you can use the formula for the ...
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Step: 2
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Financial Accounting an introduction to concepts, methods and uses
Authors: Clyde P. Stickney, Roman L. Weil, Katherine Schipper, Jennifer Francis
13th Edition
978-0538776080, 324651147, 538776080, 9780324651140, 978-0324789003
