Question 4 (i) What is the approximate annualized yield on a 6-month Treasury bill with a face value of $1000 that is sold at $970 in the primary market? (ii) A 5-year Treasury bond (TBOND1) is sold on the market one day at $1000 with an annual coupon of $60. The following day bad news hits the market and a new 5-year Treasury bond is sold on the market at an $80 annual coupon. What is the approximate new secondary market price of TBOND1? (iii) Write down an equation for the three main components of the nominal long term interest rate on a bond, clearly explaining what each symbol stands for.
Question 4 (i) What is the approximate annualized yield on a 6-month Treasury bill with a face value of $1000 that is sold at $970 in the primary market? (ii) A 5-year Treasury bond (TBOND1) is sold on the market one day at $1000 with an annual coupon of $60. The following day bad news hits the market and a new 5-year Treasury bond is sold on the market at an $80 annual coupon. What is the approximate new secondary market price of TBOND1? (iii) Write down an equation for the three main components of the nominal long term interest rate on a bond, clearly explaining what each symbol stands for.
Chapter14: Investing In Stocks And Bonds
Section: Chapter Questions
Problem 6DTM
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Question 4
(i) What is the approximate annualized yield on a 6-month Treasury bill with a face value of $1000 that is sold at $970 in the primary market?
(ii) A 5-year Treasury bond (TBOND1) is sold on the market one day at $1000 with an annual coupon of $60. The following day bad news hits the market and a new 5-year Treasury bond is sold on the market at an $80 annual coupon. What is the approximate new secondary market price of TBOND1?
(iii) Write down an equation for the three main components of the nominal long term interest rate on a bond, clearly explaining what each symbol stands for.
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