ECO 304 Money & Banking Que Coupon Bonds (show the equations) 1. In 2018, you purchased a newly issued GE Coep bond The Face value (-5100, coupons interest rate() = 456, and intuity (A) - 10 years Four (4) years later (2022) you sell the hond in the secondary market, however, market interest rates for bonds of risk and (effective) maturity are now 3.5% Calculate the selling price of your bond (6 points) 2. Calculate the Annualized Holding Period Return (HPR) on this investment (4 points) Quix 3 - Discount Bonds 1. A. You purchase a 1-year discount Treasury note for 598.52. If the Face Value is $100, calculate the yield on this note? (3 points) B. The demand for 1-year Treasury notes has decreased, causing the price to decline to 598.04. Calculate the new yield (3 points) 2. A. The US Treasury issues a 2 year discount note today that promises to pay $110.25 at maturity (this is the Face Value, F). If the current interest rate is 5%, calculate today's price for this discount note. This is a simple PV equation with 21 B. The next day, conflict breaks out in Ukrainin and demand for the note increases, pushing its price up to $103.92. Calculate the new Yield to Maurity (1) on this discount note (2) Given P.F (in part A), and you are solving for i] 3. Extra credit: Tesla Corp issues a new security that promises to pay SSO per year forever. If the appropriate interest to value this security is 4%, calculate its selling price (2) ECO 304 Money & Banking Que Coupon Bonds (show the equations) 1. In 2018, you purchased a newly issued GE Coep bond The Face value (-5100, coupons interest rate() = 456, and intuity (A) - 10 years Four (4) years later (2022) you sell the hond in the secondary market, however, market interest rates for bonds of risk and (effective) maturity are now 3.5% Calculate the selling price of your bond (6 points) 2. Calculate the Annualized Holding Period Return (HPR) on this investment (4 points) Quix 3 - Discount Bonds 1. A. You purchase a 1-year discount Treasury note for 598.52. If the Face Value is $100, calculate the yield on this note? (3 points) B. The demand for 1-year Treasury notes has decreased, causing the price to decline to 598.04. Calculate the new yield (3 points) 2. A. The US Treasury issues a 2 year discount note today that promises to pay $110.25 at maturity (this is the Face Value, F). If the current interest rate is 5%, calculate today's price for this discount note. This is a simple PV equation with 21 B. The next day, conflict breaks out in Ukrainin and demand for the note increases, pushing its price up to $103.92. Calculate the new Yield to Maurity (1) on this discount note (2) Given P.F (in part A), and you are solving for i] 3. Extra credit: Tesla Corp issues a new security that promises to pay SSO per year forever. If the appropriate interest to value this security is 4%, calculate its selling price (2)
