Question 4: Clean Price and Dirty Price (10 Points)

The prices and yields for hypothetical on-the-run Treasurys on October 20, 2020 is shown below:

U.S. Treasury Quotes. Thursday, October 20, 2020

Treasury issue

Prices and yields for on-the-run-treasuries

MATURITY	COUPON	Price	CHG
10/15/2020	1.625	100.0220	0.0080
01/31/2020	1.375	100.1360	0.0020
04/15/2021	1.500	100.0760	0.0020
11/15/2021	2.000	102.0360	0.0040
09/30/2022	1.275	103.0500	unch.
09/30/2023	1.250	103.2860	0.0020
09/30/2024	1.825	106.1740	0.0080

You decided to purchase the 4-year treasury note with a $2,000,000 face value yesterday (10/19/2020). The last interest payment on the treasury note was made on 09/30/2020. That is, the asset was purchased 19 days since the last interest payment. The settlement occurs on today (Tuesday, October 20, 2020).

a. What is the clean price of the 4-year Treasury?

b. Calculate the accrued interest due to the seller.

c. Calculate the dirty price of this transaction.