Consider the following two 3-year Treasury notes that have the same par value (the exact par value is irrelevant here, but the par value is not equal to either $100 or $1,000): a 3% coupon payable semi-annually note selling at $93 and a 9% coupon paid every six months note trading at $109. Using these two notes, you are able to synthesize a 3-year Treasury zero-coupon bond of the same par value. What is the price of this zero-coupon bond?
Consider the following two 3-year Treasury notes that have the same par value (the exact par value is irrelevant here, but the par value is not equal to either $100 or $1,000): a 3% coupon payable semi-annually note selling at $93 and a 9% coupon paid every six months note trading at $109. Using these two notes, you are able to synthesize a 3-year Treasury zero-coupon bond of the same par value. What is the price of this zero-coupon bond?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Consider the following two 3-year Treasury notes that have the same par value (the exact par value is irrelevant here, but the par value is not equal to either $100 or $1,000): a 3% coupon payable semi-annually note selling at $93 and a 9% coupon paid every six months note trading at $109. Using these two notes, you are able to synthesize a 3-year Treasury zero-coupon bond of the same par value. What is the price of this zero-coupon bond?
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