Determine the price of a five-year 5% coupon treasury bond, sold to yield 6%. Assume a...

Transcribed Image Text:

Determine the price of a five-year 5% coupon treasury bond, sold to yield 6%. Assume a flat yield curve. FV = 1000 N = 5 PMT = 50 I/Y=6 PV=2 2. You buy the treasury bond for the price calculated above You hold the bond for 3 years and sell it. Interest rates and the yield curve are exactly. the same over the 3 year holding period, Year 1 2 3 4 YTM on Treasuries 2% 3% 4% 5% A. At the end of three years, calculate the total you will have from investing the coupon payments. B. Calculate the selling price of the bond after 3 years. 5 C. What is the annualized average return over the 3 years? 6% Determine the price of a five-year 5% coupon treasury bond, sold to yield 6%. Assume a flat yield curve. FV = 1000 N = 5 PMT = 50 I/Y=6 PV=2 2. You buy the treasury bond for the price calculated above You hold the bond for 3 years and sell it. Interest rates and the yield curve are exactly. the same over the 3 year holding period, Year 1 2 3 4 YTM on Treasuries 2% 3% 4% 5% A. At the end of three years, calculate the total you will have from investing the coupon payments. B. Calculate the selling price of the bond after 3 years. 5 C. What is the annualized average return over the 3 years? 6%

Answer rating: 100% (QA)

Part 1 Price of the Treasury Bond We can use the Bond Price Formula to find the Present Value PV whi... View the full answer