Question

You find the following Treasury bond quotes. To calculate the number of years until maturity, assume that it is currently May 2019 and the bond has a par value of $1,000.
Rate Maturity Mo/Yr Bid Asked Chg Ask Yld
?? May 21 103.5540 103.5418 +.3093 6.119
5.524 May 26 104.5030 104.6487 +.4365 ??
6.193 May 36 ?? ?? +.5483 4.151

Required:
In the above table, find the Treasury bond that matures in May 2036. What is the asked price of this bond in dollars?

Answer 1

Answer:

$1,247.12

Explanation:

For computing the asked price we need to apply the present value formula i.e to be shown in the attachment below

Given that,  

Future value = $1,000

Rate of interest = 4.151% ÷ 2 = 2.076%

NPER = 17 years  × 2 = 34 years

The 20 years come from May 2019 to May 2036

PMT = $1,000 × 6.193% ÷ 2 = $30.965

The formula is shown below:

= -PV(Rate;NPER;PMT;FV;type)

So, after applying the above formula, the present value or the ask price is $1,247.12