reasury bond was issued four months ago, i.e. on June 30th, 2021, with the following characteristics. It will pay back a par value of 1,000 USD two years after the issuance date, and it also pays coupons calculated with an annual coupon rate of 6.3%. The annual interest rate is constant at 4%. Assume that every month is made of 30 days. a. What is the value of the interest r
Suppose that today is October 30th, 2021. A US Treasury bond was issued four months ago, i.e. on June 30th, 2021, with the following characteristics. It will pay back a par value of 1,000 USD two years after the issuance date, and it also pays coupons calculated with an annual coupon rate of 6.3%. The annual interest rate is constant at 4%. Assume that every month is made of 30 days.
a. What is the value of the interest rate that you decide to use to price such a bond? If it is already available in the exercise, just report it. If it is not available, compute it.
b. Compute the current price of this bond, which you will read on the Wall Street Journal, as of October 30th, 2021. Please clearly list as b1, b2, b3 etc, all the steps in your solution.
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