Question: Problem 2: The US government issues a Treasury bond that matures in 5 years, has a face value of $1,000 and a coupon yield of

Problem 2: The US government issues a Treasury bond that matures in 5 years, has a face value of $1,000 and a coupon yield of 10 percent, and pays semi-annual coupons. 1. Suppose the Yield To Maturity (YTM) of similar bonds is 8%, What is the price of this Treasury bond? 2. Suppose the YTM was 12% instead. Without making any calculation, state and prove whether the bond price would be higher or lower than the face value. 3. After holding the bond for 6 months, you receive one coupon payment and then you immediately sell the bond for a price of $110 (per $100 of face value). Compute the holding period return (the YTM is 8%)

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