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Teasury spot rates are as follows in today's market: Maturity (years) 1 2 3 Spot rate 1.9% 2.8% 3% One year ago, a 3-year Treasury
Teasury spot rates are as follows in today's market:
Maturity (years) | 1 | 2 | 3 |
---|---|---|---|
Spot rate | 1.9% | 2.8% | 3% |
One year ago, a 3-year Treasury note ($1,000 face value, 5.2% coupon rate and pays annual coupon) was issued. This security paid out its first coupon yesterday. Based on the spot rates in the table, this security should be fairly priced TODAY at $1,046.5. (hints: is this coupon bond still a 3-yr bond as of TODAY?)
A. However, the bond is traded at $1,043 in the market today, what is the YTM?
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