Bonds often pay a coupon twice a year. For the valuation of bonds that make...
80.2K
Verified Solution
Link Copied!
Question
Accounting
Bonds often pay a coupon twice a year. For the valuation of bonds that make semiannual payments, the number of periods doubles, whereas the amount of cash flow decreases by half. Using the values of cash flows and number of periods, the valuation model is adjusted accordingly. Assume that a $1,000,000 par value, semiannual coupon U.S. Treasury note with four years to maturity (YTM) has a coupon rate of 3%. The yield maturity of the bond is 11.00%. Using this information and ignoring the other costs involved, calculate the value of the Treasury note:(Note: The value of the T-note is negative because it represents a cash outflow.) $895,940.83 $634,624.76 $746,617.36 $470,368.94 Based on your calculations and understanding of semiannual coupon bonds, complete the following statements: - Assuming that interest rates remain constant, the T-note's price is expected to - The T-note described is selling at a - When valuing a semiannual coupon bond, the time period variable ( N ) used to calculate the price of a bond reflects the number of periods remaining in the bond's life
Answer & Explanation
Solved by verified expert
Get Answers to Unlimited Questions
Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!
Membership Benefits:
Unlimited Question Access with detailed Answers
Zin AI - 3 Million Words
10 Dall-E 3 Images
20 Plot Generations
Conversation with Dialogue Memory
No Ads, Ever!
Access to Our Best AI Platform: Zin AI - Your personal assistant for all your inquiries!
