Question

Assume that a $1,000,000 par value, semiannual coupon US Treasury note with three years to maturity has a coupon rate of 3%. The yield to maturity (YTM) of the bond is 11.00%. Using this information and ignoring the other costs involved, calculate the value of the Treasury note: a. $504,112.64 b. $680,151.97 c. $800,178.79 d. $960,214.55

Answer 1

Answer:

c. $800,178.79

Explanation:

In this question we use the Present value formula that is shown on the attachment below:

Given that

Future value = $1,000,000

PMT = 1,000,000 × 3% ÷ 2 = $15,000

NPER = 3 years × 2 = 6 years

Rate of interest = 11% ÷ 2 = 5.5%

The formula is shown below:

= -PV(Rate;NPER;PMT;FV;type)

So, after solving this, the present value would be $800,178.79