Looking at The Wall Street Journal you observe that the settlement price on a hypothetical 15-year, semiannual payment, 6% coupon bond is 105-21. If the bond has a $1,000 par value, what is the implied Treasury bond rate?
A) 5.44%
B) 5.72%
C) 6.00%
D) 6.30%
E) 6.62%

Question

Quizplus · Accepted Answer

The bond's price is quoted as 105-21, which means 105 and 21/32 percent of the par value. This translates to a price of $1,052.625. The bond pays a 6% coupon, or $60 annually ($30 semiannually). The yield to maturity (YTM) can be calculated using the bond price, coupon payments, and time to maturity. The YTM that equates the present value of the bond's cash flows to its price is approximately 5.44%.

Looking at the Wall Street Journal You Observe That the Settlement