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You find the following Treasury bond quotes
You find the following Treasury bond quotes. To calculate the number of years until maturity, assume that it is currently May 2019 and the bond has a par value of $1,000. Maturity Mo/Y Ask Yld Rate Bid Asked 103.5436 103.5314 Chg +.3274 ?? May 27 5.959 104.4926 104.6383 +.4269 6.152 May 32 ?? +.5379 6.153 May 42 ?? ?? 3.991 a. In the above table, find the Treasury bond that matures in May 2042. What is the asked price of this bond in dollars? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. If the bid-ask spread for this bond is 0647, what is the bid price in dollars? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) a. Asked price Bid price b.
Expert Solution
Solution
a). To find the answer, we need to put the following values in the financial calculator:
| INPUT | 23x2=46 | 3.991/2=1.9955 | (6.153%/2)x1000=30.765 | 1000 | |
| TVM | N | I/Y | PV | PMT | FV |
| OUTPUT | -1323.42 |
So, the ask price = $1,323.42
(NOTE: Try with 1323.33 if above comes incorrect due to rounding)
b). Bid price = $1,323.42 - [(.0647/100)($1,000)]
= $1,323.42 - $0.647 = $1,322.78
(NOTE: Try with 1323.69 if above comes incorrect due to rounding)
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