Below, you will find Treasury bond quotes. To calculate the number of years unti
ID: 2729631 • Letter: B
Question
Below, you will find Treasury bond quotes. To calculate the number of years until maturity, assume that it is currently May 2013.
A. In the above table, find the Treasury bond that matures in May 2033. What is the asked price of this bond in dollars? B. If the bid-ask spread for this bond is .0602, what is the bid price in dollars?
Mo/Yr Bid Asked Chg Ask
Yld ?? May 18 103.5605 103.5483 +.3158 6.219 5.774 May 23 104.5095 104.6552 +.4425 ?? 6.218 May 33 ?? ?? +.5548 4.251
Explanation / Answer
In the above table, find the Treasury bond that matures in May 2033. What is the asked price of this bond in dollars?
The coupon rate of the bond is 6.125 percent and the bond matures in 20 years. The bond coupon payments are semi annual, so the asked price is:
P= $31.09(PVIFA 4.251%/2,40) + $1,000(PVIF4.251%/2,40)=
P= 1263.21
If the bid-ask spread for this bond is .0602, what is the bid price in dollars?
Bid price = $1,263.21 – (.0602/100)($1,000)
Bid price = $1262.61
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