Interest Rates and Bond Valuation Worksheet

Part I: Go to the Federal Reserves Web site to examine historical monthly interest rates on 10-year government bonds at 

 http://www.federalreserve.gov/datadownload/Output.aspx?rel=H15&series=0809abf197c17f1ff0b2180fe7015cc3&lastObs=&from=&to=&filetype=csv&label=include&layout=seriescolumn and answer the following questions: 

A. What was the nominal rate on 10-year U.S. Treasury bonds at each of the following

dates:

1. At 04/1954: __2.29___ 

2. At 09/1976: __7.59___ 

3. At 09/1981: ___15.32_____ 

4. For the 

 Latest Month: ___2.17 August_____ 

B. Assume that a $1000 U.S. Treasury bond was purchased at par on each of first three dates above. Also assume that for each of the three bonds the reported nominal rate that you found above was the coupon rate at issuance. Assuming semi-annual coupon payments, calculate the value of each bond after 5 years based on the then 5-year nominal rates on U.S. Treasuries available at

http://www.federalreserve.gov/releases/h15/data.htm to determine the gain or loss on each of the three bonds after 5 years?

 1. At 04/1959: ________ 

 2. At 09/1981: ________ 

 3. At 09/1986: ________ 

 Which bond would you have preferred to purchase? 

 04/1954? ________ 

 09/1976? ________ 

 09/1981? ________ 

Why?