Treasury security face value

[cding]

An investor has a 1-year, 10% semianual coupon bond with a price of $975. If the 6-month T-Bill has a holding period yield of 6%, what is the one year theoretical spot rate on a bond equivalent basis?


975 = 50 / (1+6%) + 1025 / [(1+r/2)^2]

It doesn't say the face value is $1,000 in the question. Is there any trick here?

 

[JoeyDVivre]

C'mon. T-bonds come in minimum denoms of $1000. They don't come like $1032.45

 

[sparty419]

975 = 50 / (1+6%) + 1025 / [(1+r/2)^2]

thats supposed to be 1050 and not 1025.

whats the answer? I am getting 12.918 %

 

[oagra]

cding, you might need to pratice more questions.... some questions from QBank or Book 6 dont actually state a bonds par value, you just assume its $1000



Edited 1 time(s). Last edit at Saturday, May 19, 2007 at 07:36AM by oagra.

 

[oagra]

975 = 50 / (1+3%) + 1050 / [(1+r)^2]

r = 6.7%

so BEY = 2 x 6.7% = 13.4%