An asset promises to pay the following: ▪ $60 each year for the next ten years: and ▪ $1,000 in ten years Assume all the cash flows are discounted by 6%.  Use the annuity formula to get the price of the first part.  Use the standard discounting formula to get the price of the second part.  Add them together.  This is a bond! It is described as paying a coupon rate of 60/1,000 = 6% (a coupon of 60), with a face value of 1,000 and a maturity of ten years.  And its “yield-to-maturity” is 6%.

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Treasury Market

On-the-run securities are the most recently issued securities in the market depth and are therefore traded at some premium. The off-the-run securities are the ones issued just before the most recent ones. The on-the-run securities have a lower yield to the investor than the off-the-run securities.