Yield to Maturity & the Inverse Relationship between Bond Prices & Interest Rates
1. Calculate the yield to maturity on a four-year U.S. Treasury note (with a $1600 annual coupon and a face value of $25,000) whose auction price is $20,000.
2. If the Treasury issues additional identical four-year notes in order to help finance a budget deficit, and their price declines from $20,000 to $19,000, how is the yield to maturity on 4-year T-notes affected? (calculate the new yield to maturity figure within ± 1 percentage point of its actual value)