Treasury spot rates are as follows in today's market: Maturity (years) Spot rate 1 2.2% 4+ decimals 2 2.8% 3 3.7% One year ago, a 3-year Treasury note ($1,000 face value, 5.2% coupon rate and pays annual coupon) was issued. This security paid out its first coupon yesterday. Based on the spot rates in the table, this security should be fairly priced TODAY at $1,046.35. (hints: is this coupon bond still a 3-yr bond as of TODAY?) muusimm However, the bond is traded at $1,042.85 in the market today, what is the YTM?

Treasury spot rates are as follows in today's market: Maturity (years) Spot rate 1 2.2% 4+ decimals 2 2.8% 3 3.7% One year ago, a 3-year Treasury note ($1,000 face value, 5.2% coupon rate and pays annual coupon) was issued. This security paid out its first coupon yesterday. Based on the spot rates in the table, this security should be fairly priced TODAY at $1,046.35. (hints: is this coupon bond still a 3-yr bond as of TODAY?) muusimm However, the bond is traded at $1,042.85 in the market today, what is the YTM?

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter4: Bond Valuation

Section: Chapter Questions

Problem 23P

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Treasury spot rates are as follows in today's market: Maturity (years) 1 2 3 Spot rate 2.1% 2.7% 3.3% One year ago, a 3-year Treasury note ($1,000 face value, 4% coupon rate and pays annual coupon) was issued and today it has two years left to maturity and two cashflows left to pay. Part 1 If this security is fairly priced in today's market, what must be true about the YTM? Check all that apply: 3.3% > YTM > 2.7% YTM > 3.3% Being the complex average of 1-yr and 2-yr Treasury spot rates, YTM is quite close to 2-yr spot rate but quite far from 1-yr spot rate YTM < 2.1% Being the complex average of 1-yr and 2-yr Treasury spot rates, YTM is quite close to 1-yr spot rate but quite far from 2-yr spot rate 2.7% > YTM > 2.1% Part 2 If this security is under-priced but greater than $1,000 in today's market, what can you conclude about the YTM? Check all that apply: YTM < 4% 3.3% > YTM > 2.7% YTM must be greater than that computed in…
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Question #21 is attacthed below in image. Based on the spot rates in Problem 21, and assuming a constant real interest rate of 2 percent, what are the expected inflation rates for the next four years?
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