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You can buy or sell a 3% $1000 par U.S. Treasury Note that matures in exactly 5 years (meaning it pays (.03/2)*1000 coupon payments every
You can buy or sell a 3% $1000 par U.S. Treasury Note that matures in exactly 5 years (meaning it pays (.03/2)*1000 coupon payments every 6 months, starting 6 months from now through maturity, and repays $1,000 principal on maturity), with a current yield to maturity of 3.5% (assume a flat term structure of interest rates), for a price today of $1,000. Assume semi-annual compounding and semi-annual coupon payments. What is it currently worth? Would you buy it or sell it - why?
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