Suppose on january 15 the us treasury issued a five year...

Suppose on January 15, , the U.S. Treasury issued a five-year inflation-indexed note with a coupon of . On the date of issue, the consumer price index (CPI) was . By January 15, , the CPI had increased to . What principal and coupon payment was made on January 15, ? (Note: U.S. Treasury pays semi-annual coupons) Question content area bottom Part 1 The CPI index appreciated by enter your response here. (Round to five decimal places.)

Transcript

00:01 Hello students we are going to write here a bond with a coupon rate of 6 % makes semi -annual coupon payments on january 15th and july 15 of each year the wall street journal reports the ask price for the bond on january 30th 10 -04 coupon period has 182 days what is the invoice price of bond so we are going to write here for this so first we are going to calculate flat price so this must be written as if i write here for this dollars thousand multiplied by 100 .04 100 .04 if i write here for this so this value must be we are going to write here for this dollars dollars thousand if i write here for this so basically this is the value in percentage this is the value in percentage so if i write here for this this much must be dollars thousand point four so now we are going to write here for this an accrued interest and we are going to write here for this accrued interest will be will be given by we are going to write here for this this must be written as accrued interest so this value must be so 6 % so 0 .06 multiplied by and what is our fat power so this is thousand what is our this value flat price value which is thousand and this whole term must be divided by 2 this whole term must be divided by 2 and we are going to write here for this so this must be calculated as this must be multiplied by 15 divided by 182 so 182 is time period number of days and we are going to write here this must be 15 so we are going to calculate this value must be this is 30 divided by 2 which is 15 so basically this is 2 to 5 divided by 182 2 to 5 divided by so 3 and this is 15 so 2 to 5 divided by 182 which is we are going to write here sorry this must be 450 this must be 450 so now this is dollars 2 .472 so now we are going to write here for this what is our invoice price? invoice price this is flat price flat price we are going to write here for this so let's erase this to make it more clear and this is a crude interest.

03:34 So if i write here this is thousand point four plus 2 .472 which is 1002.

03:42 Which is 1 .02 .872 and this is the value in dollars...

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