A Treasury bond is quoted at a price of 101:14 with a current yield of

QUESTION

A Treasury bond is quoted at a price of 101:14 with a current yield of 7.236 percent. What is the coupon rate?a. 7.20 percentb. 7.28 percentc. 7.30 percentd. 7.34 percente. 7.39 percent
D is the right answer Current Yield = [Annual Coupon / Current BondPrice] 7.236% = [Annual Coupon / Current BondPrice] Current Bond Price (Bonds quoted price) = 101:14 = 10114/32 Current Bond Price (Bonds quoted price) = 101.4375 percent offace value. Current Bond Price (Bonds quoted price) = $1,000 *101.4375% Current Bond Price (Bonds quoted price) = $1,014.375 Current Yield = [Annual Coupon /¦

rrent BondPrice] 7.236% = [Annual Coupon / $1,014.375 [Annual Coupon Rate / $1,014.375] = 0.07236 Annual Coupon Amount = $1,014.375 * 0.07236 Annual Coupon Amount = $73.40 Annual Coupon Rate = [$73.40 / $1,000] Annual Coupon Rate = 0.0734 (or)7.34% Thus, Answer is 7.34%

ANSWER:

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