Below, you will find Treasury bond quotes. To calculate the number of years unti

Question

Below, you will find Treasury bond quotes. To calculate the number of years until maturity, assume that it is currently May 2013. In the above table, find the Treasury bond that matures in May 2039. What is the asked price of this bond in dollars? (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).) Asked price $ If the bid-ask spread for this bond is .0552, what is the bid price in dollars? (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).) Bid price $

Explanation / Answer

1.

Annual Coupon = 6.178%*1000 = 61.78

Year YTM = 4.091%

nper = (2039-2013) = 26

Asked Price = Annual Coupon*PVIFA(rate,nper) + Face Value*PVIF(ratte,nper)

Asked Price = 61.78*PVIFA(4.091%,26) + 1000*PVIF(4.091%,26)

Asked Price = 61.78*15.82547 + 1000*0.35258

Asked Price = $ 1331.86

Therefore, asked price of the bond = 1331.86*100/1000 = $133.19

2.

Bid price in dollars = Asked Price - bid-ask spread

Bid price in dollars = 133.19 -0.0552

Bid price in dollars = $ 133.13

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