How much would you have to pay to purchase one of these bond

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Reference no: EM131963549

Turn back to figure 2.3 and and look at the Treasury bond maturing in February 2036 (Below in bold is the information from the figure for the bond maturing in Feb. 2036, AND my professors answer. I do not understand how she did what she did and why. If someone could briefly explain why she got what she got etc it would be much appreciated.)

A) How much would you have to pay to purchase one of these bonds?

B) What is its coupon rate?

C) What is the current yield (ie coupon income as a fraction of bond price) of the bond?

Coupon = 4.500

Bid = 121.3359

Asked = 121.4141

CHG = .2578

Asked YTM = 3.121

A) You would have to pay the asked price of: 121.41 = 121.41% of par = $1,214.14

B) The coupon rate is 4.50%, implying coupon payments of $45.00 annually or, more precisely, $22.50 (=45.00/2) semiannually.

C) Given the asked price and coupon rate, we can calculate current yield with the formula: Current yield = 4.50/121.14 = .0371 = 3.71%

Reference no: EM131963549

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