n, 20-year Government of Canada bond was issued on Jun 15, 2016. At what price did it trade on December 10, 2020, when the market's required return was 5.2% compounded semiannually? The textbooks answer is $1,168.86.

n, 20-year Government of Canada bond was issued on Jun 15, 2016. At what price did it trade on December 10, 2020, when the market's required return was 5.2% compounded semiannually? The textbooks answer is $1,168.86.

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter2: The Domestic And International Financial Marketplace

Section: Chapter Questions

Problem 4P

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Concept explainers

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.

Question

A $1000, 6.5% coupon, 20-year Government of Canada bond was issued on Jun 15, 2016. At what price did it trade on December 10, 2020, when the market's required return was 5.2% compounded semiannually?

The textbooks answer is $1,168.86.

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