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Homework answers / question archive / Suppose on January? 15, 2013?, the U

Suppose on January? 15, 2013?, the U

Finance

Suppose on January? 15, 2013?, the U.S. Treasury issued a? five-year inflation-indexed note with a coupon of 4%. On the date of? issue, the consumer price index? (CPI) was 231. By January? 15, 2018?, the CPI had increased to 307. What principal and coupon payment was made on January? 15, 2018?? ?(Note: U.S. Treasury pays? semi-annual coupons)

The CPI index appreciated by

 ?(Round to five decimal? places.)

The principal amount of the bond increased to ?$

 ?(Round to the nearest? cent.)

The? semi-annual coupon payment is ?$

 ? (Round to the nearest? cent.)

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Computation of the CPI index appreciated by:-

CPI index = (New CPI / Old CPI)

= (307 / 231) 

= 1.32900

 

 

Computation of the principal amount:-

Principal amount = Face value *  CPI index

= $1,000 * 1.32900

= $1,329

 

Computation of the semiannual coupon payment:-

Semiannual coupon payment = $1,329 * 4% / 2

= $26.58