A Treasury bond is quoted at a price of 106:23 with a 3

Finance Aug 07, 2020

A Treasury bond is quoted at a price of 106:23 with a 3.50 percent coupon. The bond pays interest semiannually. What is the current yield on one of these bonds

Expert Solution

Calculation of Coupon payment

Coupan Payment = Face value * Coupon rate

= $100*3.5% = $3.50

Calculation of market price of bond

MP. = $106 + 23/32 = $106.71875

Current yield = Coupon payment/Current price

Current yield. = 3.5/106.71875 = 3.2796%

Current yield roinded off to 3.28%

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