Assume that a $100000 par value semiannual coupon U.S. Treasury note with five years to maturity (YTM) has a coupon rate of 5%. The yield to maturity of the
bond is 11.00%. Using ths information and ignoring the other costs involved the value of the T-note is calculated as $773871.23
Based on this calculation and an understanding of semiannual coupon bonds complete the following statements:
1. Assuming the interest rates remain constant the T-notes price is expected to _____________. (Increase or Decrease) Please Explain Why.
2. The T-note described is selling at a ________________. (Premium or Discount) Please Explain Why.
3. When valuing a semiannual coupon bond the time period N in the present value formula used to calculate the price of the bond is treated in terms of
____________ periods. (Annual 6 month 4 month 12 month)