To calculate the number of years until maturity, assume that it is currently May
ID: 2733612 • Letter: T
Question
To calculate the number of years until maturity, assume that it is currently May 2013.
Rate
Maturity
Mo/Yr
Bid
Asked
Chg
Ask
Yld
??
May 22
103.5410
103.6288
+.3248
2.249
6.052
May 27
104.4900
104.6357
+.4245
??
6.143
May 37
??
??
+.5353
3.951
In the above table, find the Treasury bond that matures in May 2022. What is the coupon rate for this bond? (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).)
Rate
Maturity
Mo/Yr
Bid
Asked
Chg
Ask
Yld
??
May 22
103.5410
103.6288
+.3248
2.249
6.052
May 27
104.4900
104.6357
+.4245
??
6.143
May 37
??
??
+.5353
3.951
Explanation / Answer
Answer: Here we need to find the coupon rate of the bond. The price of the bond is:
Dollar price = 103.6288 % × $1,000=$1036.288
So the bond price equation is:
P= $1,036.288 =C(PVIFA1.1245%,18) + $1,000(PVIF1.1245%,18)
Solving for the coupon payment, we get:
C= $13.48
Since this is the semiannual payment, the annual coupon payment is:
2 × $13.48 = $26.96
And the coupon rate is the coupon rate divided by par value, so:
Coupon rate = $26.96 / $1,000
Coupon rate = .02696, or 2.69%
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