Suppose the U.S. government issues a two-year Treasury note with a face value of $4,000 and an 8-percent coupon.
(A) If the curent interest rate is 10 percent, what wril be the market price of the mote?
(B) Suppose you expect the interest rate to remain at 10 percent this year but rise ta 12 percent next year. How much wauld you pay for the note tady? Why?

Question

Suppose the U.S. government issues a two-year Treasury note with a face value of $4,000 and an 8-percent coupon.
 (A) If the curent interest rate is 10 percent, what wril be the market price of the mote?
(B) Suppose you expect the interest rate to remain at 10 percent this year but rise ta 12 percent next year. How much wauld you pay for the note tady? Why?

Quizplus · Accepted Answer

The Answer of Suppose the U.S. government issues a two-year Treasury note with a face value of $4,000 and an 8-percent coupon.
 (A) If the curent interest rate is 10 percent, what wril be the market price of the mote?
(B) Suppose you expect the interest rate to remain at 10 percent this year but rise ta 12 percent next year. How much wauld you pay for the note tady? Why?