On February 15, 2017, the U.S. Treasury issued a 30-year to maturity bond with a 3.0% coupon. The price was 99.901613 (% of par value). The bond makes semi-annual coupon payments and has a minimum face value of $100.
(a) What are the coupon rate and the current yield on this bond on the date of issue?
(b) Write out the equation to solve for yield to maturity for this bond on the date of issue and then solve for the yield to maturity. Do this in excel – look at the example on page 452 of your text.
(c) If this bond’s yield to maturity remains constant, then, in 1 year, will the bond’s price be higher, lower, or unchanged? Why? Solve for the price of the bond in this case.