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You have purchased a $1,000,000 million Face or Par Value 5-year T-note. This 5-year T-note pays...

You have purchased a $1,000,000 million Face or Par Value 5-year T-note. This 5-year T-note pays a 2.5% coupon (paid semi-annually) and has a current market price equal to 94.50% of Face or Par value ($945,000).   Why would the price of this 5-year T-note decline? What is the current Yield to Maturity (YTM) of this 5-year T-note?

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Answer #1

          
Face value   1000000   million  
Price   945000   million  
Term   10   semi annual periods  
Coupon   12500   each period  
          
Yield   3.72%   RATE(10,12500,-945000,1000000,,)*2  
          
The price of this note would decrease if the yield in the market increases further          
          

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