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.

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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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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