Your firm has a $10,000 par value U.S. Treasury bond with 30 years to maturity, annual coupon rate of 3.00% with semiannual coupon payments. Assume that the market annual yield to maturity on 30-year T bonds, found in the US Treasury Yield curve, is 3.04%.

What should the asked price (price you would pay) be for the bond?

Assume: YTM from US Treasury Yield Curve = 3.04% or semiannual rate = 1.52%

Hint:

V_B =

If the 30 US Treasury Bond rate jumps immediately to 4.5%, what is the new price for the 30-year T bond? How much, in percent, would you lose or gain if you had purchased the bond in part A.

V_B = 150 (32.748953) + 10,000(0.263149)

=$4,912.34 + 2,631.49= $7,543.83

Gain/Loss%=(price@ r= 4.5%) - (price@ r= 3.14%)/(p