A Treasury note with a 6% coupon, semiannual payments, and par value of $1,000 yields 3.2% and has four payments left to maturity. There are 101 days until the next coupon payment and 182 days between coupons. What is the clean price of the note (i.e., price net of accrued interest)?

A Treasury note with a 6% coupon, semiannual payments, and par value of $1,000 yields 3.2% and has four payments left to maturity. There are 101 days until the next coupon payment and 182 days between coupons. What is the clean price of the note (i.e., price net of accrued interest)?

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 2P

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Concept explainers

Market Efficiency

Market efficiency refers to the market's ability to provide investors with all available information about investment options for buying and selling securities. Market efficiency reflects the true value of securities without undervaluing or overvaluing them. When the quality and quantity of information increase, the market becomes more efficient, allowing it to reduce arbitrage and obtain higher market returns from investment. In a well-functioning market, everyone receives all information completely and immediately at no cost. It opens up a plethora of opportunities for investors to access various investment options.

Question

A Treasury note with a 6% coupon,
semiannual payments, and par value of
$1,000 yields 3.2% and has four payments left
to maturity. There are 101 days until the next
coupon payment and 182 days between
coupons. What is the clean price of the note
(i.e., price net of accrued interest)?

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