Q. 2. (2 points) You bought a $5,000 face value Treasury note at the price of $4,500, which pays $150 in interest per year and matures in two years.

(1) What is the coupon payment?

(2) Calculate the coupon rate.

(3) Calculate the current yield.

(4) Are the coupon rate and the current yield satisfactory as a measure of the interest rate?

Q. 3. (2 points) You bought a $5,000 face value Treasury note at the price of $4,500, which pays $150 in interest per year and matures in two years. After you held the Treasury note for one year, you have sold it for $4,600.

(1) Explain the present value (PV).

(2) Write down the formula for the yield to maturity for the T-note.

(3) Explain the holding-period yield.

(4) Write down the formula for the holding period yield for the T-note.

Q. 4. (2 points) (1) You bought a $1,000 face value Treasury bill maturing in one year at the discount price of $800. Calculate the yield to maturity for this Treasury bill.

(2) You bought a $1,000 face value bond that promises to pay a fixed interest of $50 forever with no redemption date. The purchase price of the bond is $800. Calculate the interest on the bond