Question

Assume that a $1,000,000 par value, semiannual coupon U.S. Treasury note with four years to maturity has a coupon rate of 4%. The yield to maturity (YTM) of the bond is 7.70%. Using this information and ignoring the other costs involved, calculate the value of the Treasury note

Answer 1

Answer:

$8,744,669.10

Explanation:

Using the MS Excel Present value function

Value of the note = PV(Rate, Nper, PMT, -FV, Type)

Value of the note = PV(7.7%/2, 4*2, -1000000*4%/2, -1000000)

Value of the note = 8744669.0978

Value of the note = $8,744,669.10

So, the value of the Treasury note is $8,744,669.10