Revision as of 23:18, 4 December 2023 by Admin (Created page with "Treasury bonds paying an 8% coupon rate with semiannual payments currently sell at par value. What coupon rate would they have to pay in order to sell at par if they paid their coupons annually? <ul class="mw-excansopts"> <li>8%</li> <li>8.04%</li> <li>8.08%</li> <li>8.12%</li> <li>8.16%</li> </ul> '''References''' {{cite web |url=https://alo.mit.edu/wp-content/uploads/2015/06/PS_Part1.pdf |last1=Lo |first1=Andrew W. |last2 = Wang | first2 = Jiang |website=alo.mit.edu...")
Dec 04'23
Exercise
Treasury bonds paying an 8% coupon rate with semiannual payments currently sell at par value. What coupon rate would they have to pay in order to sell at par if they paid their coupons annually?
- 8%
- 8.04%
- 8.08%
- 8.12%
- 8.16%
References
Lo, Andrew W.; Wang, Jiang. "MIT Sloan Finance Problems and Solutions Collection Finance Theory I" (PDF). alo.mit.edu. Retrieved November 30, 2023.
Dec 04'23
Solution: E
The effective annual yield on the semi-annual coupon bonds is 8.16%. If the annual coupon bonds are to sell at par, they must offer the same yield, which will require an annual coupon of 8.16%.
References
Lo, Andrew W.; Wang, Jiang. "MIT Sloan Finance Problems and Solutions Collection Finance Theory I" (PDF). alo.mit.edu. Retrieved November 30, 2023.