question archive The 6 month, 12 month, 18 month and 24 month U
The 6 month, 12 month, 18 month and 24 month U
Subject:FinancePrice:2.86 Bought3
The 6 month, 12 month, 18 month and 24 month U.S. Treasury spot rates are 3.7%, 4.3%, 4.8%, 5.2% respectively, then what is the price today of a 2-year Treasury note with par value of $100 and coupon rate at 6%? (Hint: Treasury notes pay coupons semi-annually). The answer is 104.34 The answer is 113.02 The answer is 101.69 The answer is 107.88
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Coupon payment (Semi-annual) = $3
We have to discount the cashflows according to the spot rate for each time period. Hence:
PV = 3/1.0370.5 + 3/1.043 + 3/1.0481.5 + 103/1.0522
= $101.69
