Question1

Today is 15 May 2020, Sue just purchased a Treasury bond with a coupon rate ofj2= 3.2% p.a. and a face value of $100 that matures at par. The purchase price was $98.743. The maturity date of this bond is 15 May 2022.

a)Use the approximate bond yield formula to estimate the yield rate. Give your answer inj2form, rounded to 3 decimal places.

Select one:

a.3.853%

b.2.052%

c.3.486%

d.1.926%

Question2

Today is 15 May 2020, Sue just purchased a Treasury bond with a coupon rate ofj2= 3.2% p.a. and a face value of $100 that matures at par. The purchase price was $98.743. The maturity date of this bond is 15 May 2022.

b) Use linear interpolation to calculate the yield rate. Give your answer inj2form, rounded to 3 decimal places.Hint:1.65% per half year and 1.9% per half year are the lower bound and the upper bound for the linear interpolation

Select one:

a.1.929%

b.3.859%

c.3.550%

d.3.694%

Question3

Today is 15 May 2020, Sue just purchased a Treasury bond with a coupon rate ofj2= 3.2% p.a. and a face value of $100 that matures at par. The maturity date of this bond is 15 May 2022. Assume that we do not know her purchase price.

c)Calculate the duration of this Treasury bond. Assume the yield rate isj2= 3.68% p.a. Give your answer in terms of years, rounded to four decimal places.

Select one:

a.1.9511

b.1.9530

c.3.9060

d.3.9021