Calculate the price that you can sell your treasury note

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Reference no: EM133664202

Problem

Consider a $1000 face value 3-year treasury with 2.5% annual coupon and a yield of 1.3%.

Suppose that after one year and after receiving one coupon payment, you decide to sell your treasury note. Consider the following two scenarios:

Scenario A: interest rates have fallen to 1%.
Scenario B: interest rates have risen to 2%.

I. Calculate the price that you can sell your treasury note for under scenario A and the associated rate of return when you sell your treasury note given Scenario A.

II. Calculate the price that you can sell your treasury note for under scenario B and the associated rate of return when you sell your treasury note given Scenario B.

Reference no: EM133664202

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