Fixed Income Securities Test 2 (Answered) Complete Solution

Fixed Income Securities Test 2 (Answered) Complete Solution Assume you purchased Treasury bond on November 14, with an annual coupon rate equal to 15%. At settlement you must pay accrued interest equal to $2.51. Assuming there are 182 days in a coupon period, how many days were in the AI period? Coupon of 15% = $15 per $100 of par Coupon interest per day = 15 / 364 = .0412 $2.51 / .0412 = 61 days Which of the following statements is FALSE? - all coupon treasury security can be created STRIPs - Treasury STRIPs were created due to demand for long term zero coupon with no credit risk - Treasury strips are uniquely attractive to US investors due to their preferential tax treatment False = Treasury strips are uniquely attractive to US investors due to their preferential tax treatment Their tax treatment is not preferred it is actually bad because you can be paying out tax even though you are not receiving cash flow Price of a bond quoted as: 96-14 96 + 14/32 = 96.4375 Price of a bond quoted as: 96.14 96 + 14/32 = 96.4375 Price of a bond quoted as: 96.14+ 95 + 14/32 + 1/64 = 96.453125 Price of a bond quoted as: 96.141 96 + 14/32 + 1 / 256 = 96. Price of a bond quoted as: 96.142 96 + 14/32 + 2/256 = 96.4453125 Assuming the quoted price for a $100,000 par value treasury coupon is 104.037, the dollar price of this security is closest to? 104 + 3/32 + 7/256 = 104.12109