Consider the following U.S. Treasury bond quotation from The Wall Street Journal
ID: 2651114 • Letter: C
Question
Consider the following U.S. Treasury bond quotation from The Wall Street Journal. It is June 27, 2015. The bond has a $1,000 face value and pays semiannual coupons.
Maturity
Coupon
Bid
Asked
Chg
Ask
Yld
2027 Jun 27
3.675
97:16
97:17
+18
??????
(a) (2 points) How much will an investor receive if he/she sells this T-bond?
(b)(3 points) Fill in the missing information for Ask Yld?
(c)(2 points) What was the yesterday’s asked price?
Maturity
Coupon
Bid
Asked
Chg
Ask
Yld
2027 Jun 27
3.675
97:16
97:17
+18
??????
Explanation / Answer
a. Investor will receive the bid price if he sells the bond. Investor will receive 99 and 16/32 or $975
b. The asked price is 97 and 17/32 or $975.31. Ask yield refers to the yield or rate of return that investor would receive if he or she bought the note at ask price. Coupon rate is 3.675% semi-annual. Time to maturity is 12 years.
Thus Ask yield is = 3.93%
c. Change is +18 i.e. 18/32. Thus Yesterday ask price = 96:31
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