Bonds often pay a coupon twice a year. For the valuation of bonds that make semiannual payments, the number of periods doubles, whereas the amount of cash flow decreases by half. Using the values of cash flows and number of periods, the valuation model is adjusted accordingly. Assume that a $1,000,000 par value, semiannual coupon U.S. Treasury note with four years to maturity has a coupon rate of 4%. The yield to maturity (YTM) of the bond is 7.70%. Using this information and ignoring the other costs involved, the value of the Treasury note is __________.

Based on your calculations and understanding of semi coupon bonds, complete the following statements:

Assuming that interest rates remain constant, the T-notes price is expected to ___________. (increase or Decrease)

The T-note described is selling at a __________. (Premium or Discount)

When valuing a semiannual coupon bond, the time period variable (N) used to calculate the price of a bond reflects the number of __________(12 month, 3 month, 6-month or 9 month) periods remaining in the bonds life.