You own a 10-year, $10,000 US Treasury bond with a coupon rate of 3%. There are...
You own a 10-year, $10,000 US Treasury bond with a coupon rate of 3%. There are two years left to maturity, and you are planning to sell the bond in the secondary market. If the market interest rate is 5%, how much can you expect to get for the bond?
| a. |
$9,500 |
|
| b. |
$9,628 |
|
| c. |
$10,600 |
|
| d. |
$10,000 |
Homework Answers
face value = 10000
coupon rate = 3%
Coupon payment = 3% * 10000 = 300
time to maturity = 2 yrs
Present value = 300*(P/A, 5%, 2) + 10000*(P/F, 5%, 2)
= 300*1.85941 + 10000*0.907029
= 9628.12
Option B is correct
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