1 wsj reports that interest rates on 4-year treasuries are, Ask an Expert

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1. WSJ reports that interest rates on 4-year Treasuries are currently r_T4= 4.82% and 6-year Treasuries are r_T6= 4.15%. Assume that the pure expectations theory is valid. Determine what 2-year Treasuries will be yielding 4 years from now (find₄r_T2). Show your work.

2. You are considering buying an IBM bond. The bond has an 8% fixed-rate semiannual coupon and $1,000 face value. The bond is scheduled to mature in 9 years and has a price of $1,150. It is also callable in 5 years at a call price of $1,040. For part a and b, show your calculator keystrokes where appropriate.

a) What is the bond's nominal yield to maturity (find the annual rate)?

b) What is the bond's nominal yield to call (find the annual rate)?

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Category:- Basic Finance
Reference No.:- M91698782

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