Treasury prices and yields are quoted in newspapers and onli

Treasury prices and yields are quoted in newspapers and online. To get practice reading and understandir these quotes, locate the Treasury issue in Figure 7.4 maturing in August 2028. Assume a par value of $10,000 and answer the following questions. What is its coupon rate? (Enter your answer as a percent rounded to 3 decimal places, e.g., 32.161.) Coupon rate What is the quoted price (in dollars) that you would receive for selling this bond? (Do not round intermediate calculations. Round your answer to 2 decimal places, e.9.32.16.) Bid price What was the previous day\'s quoted price (in dollars) to purchase the bond? (Do not round intermediate calculations. Round your answer to 2 decimal places, e.g. 32.16) Asked price

Solution

1) The coupon rate, located in the second column of the quote is 5.5%

2)

The bid price is:Bid price = 126.2891 % × $10,000

Bid price = $12,628.91

3)

The previous day’s ask price is found by:

Previous day’s asked price = Today’s asked price – Change

Previous day’s asked price = 126.3672 – 0.7422

Previous day’s asked price = 125.625

The previous day’s price in dollars was:

Previous day’s dollar price = (125.625 / 100) × $10,000

Previous day’s dollar price = $12,525.5