Problem Set 1
1. Go to the website http://online.wsj.com/mdc/page/marketsdata.html, click on the tab “rates,” click on the tab “Bonds, Rates and Credit Markets,” click on “Treasury Quotes,” and then answer the following questions:
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Get Help Now!a. Select a bond maturing after December 2020. What is its coupon rate?
b. What is its yield to maturity?
c. What are its bid and asked prices per $100 of face value?
d. If you bought such a bond with a face value of $1,000,000 and immediately sold it, how much transaction cost would you incur? Why does the number you calculated indicate that this bond is very liquid?
e. If you had bought the bond the previous day, how much would your capital gain be (negative if a loss)?
f. Select a Treasury bill maturing at least 20 weeks in the future. What is its yield to maturity?
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