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23 March, 08:06

In November 2017, Treasury 4 1/2s of 2044 offered a semiannually compounded yield to maturity of 2.66%. Recognizing that coupons are paid semiannually, calculate the bond's price. Assume face value is $1,000. (Do not round intermediate calculations. Round your answer to 2 decimal places.)

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  1. 23 March, 08:15
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    The price of a bond is $492.24

    Explanation:

    F = face value of bond = $1000

    T=time to maturity of bond = 2044-2017 = 27 years

    r=yield to maturity=2.66% semi-annulay=0.0266

    Formula to calculate price = F / (1+r) ∧T

    we have = 1000 / (1+.0266) ∧27 = 1000/2.0315 = $492.24
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