CH2: Securities

Question 1

Determine the current yield on the Treasury bond if the coupon rate is 4.5% and it is maturing in February 2036 based on the asked price (121.4141). Assume a face value of $1,000.00. a. 3.121% b. 3.71% c. 4.5% d. 9.00%

Answer 1

Current_yield = annual_Coupon_payment / current_market_price b.

Question 2

Find the Effective_Yield_Return of T-bill, Bank_Discount_Yield, Bond_Equivelant_Yield

Answer 2

a. R_ey = [(FV - P) / FV]^365/n - 1 (Find price from this equation)
b. R_bd = [(FV - P) / FV] * [360/n]
c. R_bey = [(FV - P) / P] * [360/n]