Using the data from problem (3) above, show how you would use the BOND spreadsheet in your financial calculator to solve for the bond clean price and accrued interest. For each prompt below, enter EXACTLY what you would key into your BA II Plus calculator BOND spreadsheet for that prompt. For the last two fields, show the bond clean price and accrued interest that the calculator returns to you when you press the CPT key.

SDT:

CPN:

RDT:

RV:

360 or ACT (highlight the correct setting)

1/Y or 2/Y (highlight the correct setting)

YLD:

PRI:

AI:

problem 3. You initiated a transaction to purchase a 2.875% coupon 10-year U.S. Treasury Note on Wednesday 9/13/2018. The maturity date of the note is 5/15/2026 and its yield to maturity is 2.950%. Please answer the following questions about this note. (Note: you can check your work in parts (f), (g) and (h) using the BOND spreadsheet in your calculator, but I want to see the equations setup and worked through in those parts for full credit.)

(a) What are the two dates every year on which the note pays its coupons.

Coupon= 2.875% , 10 years, 6 months maturity date = 5/15/2026

Coupon paid in 180 days before the due date on 5/15/2026 15^th November

6 months before 15^th May.

(b) On what date was the last (previous) coupon paid?

The last coupon paid in 5/15/2015

(c) What is the settlement date (SDT) for this note?

Settlement date = T+1

Settlement date = 9/13/2018 + 1 = 9/14/2018

(d) How many days are there in the current coupon period?

Last coupon paid on 5/15/2018

Next coupon paid on 11/15/2018

There are 62 days in the current coupon period.

(e) How many days between the last coupon and the SDT?

(f) What is the full price of the note on the SDT? Draw a timeline for just the current coupon period (like we did in class) and calculate the bonds full price using Method 2 in the handout, which is the method used in the text and slides).

(g) What is the accrued interest on the SDT?

(h) What is the clean price of the note on the SDT?

All prices and interest rates must be expressed to THREE decimal places. You must show your work for every problem in order to receive full credit.