Principles of Finance_Biederman_Date_040710

Principles of Finance_Biederman_Date_040710 - No such thing...

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No such thing as a premium treasury bill—only discount and par Tbill quote Days to maturity. . 360 Bid discount…. 4.84 Ask discount… 4.82 Show ask yield…5.06 Set up: - Par value= $10000, discount= $482, PV=$9518, Ask yield= 482/9518=5.06 Treasury notes and bonds example 2010 October 15 - Bid ask spread is so small—heavily traded security Treasury bonds, notes and bills handout 1/1/01 Use financial calculator when using WSJ overhead from January 01, determine ask price (PV) of August 04 6% note 2 years later—still a premium and has increases, would think converging towards par but doesn’t because monetary policy loosened (decrease interest rate) Now suppose you want to determine price of same note as of July 9 2003. Using 7/9/03 WSJ we can approximate (ask) price as follows: - Set: FV-$1000 N=13 PMT=5 2per=.09% - Solve: PV-$1052.96 -- 105 12/32 Practice problem: Given April 2009 Quote - 4% U.S. treasury note due April 2011. All treasury notes and bonds pay interest semi- annually. If YTM=4.48% verify that the quoted price of note is approximately 99:03 par
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Principles of Finance_Biederman_Date_040710 - No such thing...

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