Question: Attempts Do No Harm / 2 8. Valuing semiannual coupon bonds Bonds often pay a coupon twice a year. For the valuation of bonds that

Attempts Do No Harm / 2 8. Valuing semiannual coupon bonds

Attempts Do No Harm / 2 8. Valuing semiannual coupon bonds Bonds often pay a coupon twice a year. For the valuation of bonds that make semiannual payments, the number of periods doubles, whereas the amount of cash flow decreases by half. Using the values of cash flows and number of periods, the valuation model is adjusted accordingly. Assume that a $1,000,000 par value, semiannual coupon U.S. Treasury note with four years to maturity (YTM) has a coupon rate of 4%. The yield to maturity of the bond is 7.70%. Using this information and ignoring the other costs involved, calculate the value of the Treasury note:(Note: The value of the T-note is negative because it represents a cash outflow.) 0-$551,041.53 O -$1,049,602.92 0 -$874,669.10 0 - $743,468.74 Based on your calculations and understanding of semiannual coupon bonds, complete the following statements: Assuming that interest rates remain constant, the T-note's price is expected to The T-note described is selling at a . When valuing a semiannual coupon bond, the time period variable (N) used to calculate the price of a bond reflects the number of periods remaining in the bond's life. Grade It Now Save & Continue Continue without saving

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