Consider various U.S. Treasury bonds that each pay a 5% annual coupon rate and have a face
Question:
Consider various U.S. Treasury bonds that each pay a 5% annual coupon rate and have a face value of
$1000.
(a) Complete the table below. Show your work.
Years to Maturity Yield-to-Maturity Current Bond Price
Treasury Bond #1 15 5%
Treasury Bond #2 15 7%
Treasury Bond #3 15 9%
(b) Based on the table in Part (a), describe the relationship between current bond price and yield-to
maturity.
(c) Consider various U.S. Treasury bonds that each pay a 5% annual coupon rate and have a face value of
$1000. Complete the table below. Show your work. [8 Points]
Years to Maturity Yield-to-Maturity Current Bond Price
Treasury Bond #1 5 7%
Treasury Bond #2 10 7%
Treasury Bond #3 20 7%
(d) Based on the table in Part (c), describe the relationship between years to maturity and the current bond
price.
Expert Answer:
a To calculate the current bond price for each Treasury bond we can use the formula for the present value of a bond Bond Price Coupon Payment 1 Yield1 ... View the full answer
