A 20-year U.S. Treasury bond with a face value of $10,000 pays a coupon of 5.25%

Question

A 20-year U.S. Treasury bond with a face value of $10,000 pays a coupon of 5.25% (2.625% of face value every six months). The semiannually compounded interest rate is 4.8% (a six-month discount rate of 4.8/2 = 2.4%). What is the present value of the bond?  (Do not round intermediate calculations. Round your answer to 2 decimal places.)

A 20-year U.S. Treasury bond with a face value of $10,000 pays a coupon of 5.25% (2.625% of face value every six months). The semiannually compounded interest rate is 4.8% (a six-month discount rate of 4.8/2 = 2.4%). What is the present value of the bond?  (Do not round intermediate calculations. Round your answer to 2 decimal places.)

Explanation / Answer

Hi,

The correct answer is as follows:

Present Value of the bond = 262.5*(1-(1+2.4%)^(-40))/2.4%+10000*(1+2.4%)^(-40)

=$10574.44

hence, the price of the bond is $10574.44

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