A 28-year U.S. Treasury bond with a face value of $1,000 pays a coupon of 5.25% (2.625% of face value every six months). The reported yield to maturity is 5.0% (a six-month discount rate of 5.0/2 = 2.5%). a. What is the present value of the bond? b. If the yield to maturity changes to 1%, what will be the present value? c. If the yield to maturity changes to 8%, what will be the present value? d. If the yield to maturity changes to 15%, what will be the present value? (For all requirements, do not round intermediate calculations. Round your answers to 2 decimal places.) a. Present value b. Present value C. Present value d. Present value

Intermediate Financial Management (MindTap Course List)
13th Edition
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Eugene F. Brigham, Phillip R. Daves
Chapter4: Bond Valuation
Section: Chapter Questions
Problem 1P
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A 28-year U.S. Treasury bond with a face value of $1,000 pays a coupon of 5.25% (2.625% of face value every six months). The
reported yield to maturity is 5.0% (a six-month discount rate of 5.0/2 = 2.5%).
a. What is the present value of the bond?
b. If the yield to maturity changes to 1%, what will be the present value?
c. If the yield to maturity changes to 8%, what will be the present value?
d. If the yield to maturity changes to 15%, what will be the present value?
(For all requirements, do not round intermediate calculations. Round your answers to 2 decimal places.)
a.
Present value
b.
Present value
C.
Present value
d. Present value
Transcribed Image Text:A 28-year U.S. Treasury bond with a face value of $1,000 pays a coupon of 5.25% (2.625% of face value every six months). The reported yield to maturity is 5.0% (a six-month discount rate of 5.0/2 = 2.5%). a. What is the present value of the bond? b. If the yield to maturity changes to 1%, what will be the present value? c. If the yield to maturity changes to 8%, what will be the present value? d. If the yield to maturity changes to 15%, what will be the present value? (For all requirements, do not round intermediate calculations. Round your answers to 2 decimal places.) a. Present value b. Present value C. Present value d. Present value
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