Answer:
C. $937,501.88
2. B. Discount
3. A. Increase
4. 6-month
Explanation:
1. The computation of value of the Treasury note is shown below:-
Rate = YTM ÷ 2
= 8.4% ÷ 2 = 4.2%
Nper = 2 × 3 years
= 6
PMT = Semi annual coupon = 6% ÷ 2 × $1,000,000
= $30,000
FV = future value = par value = $1,000,000
So,
The price of the bond = - PV (Rate, Nper, PMT, FV)
= - PV (4.2%, 6, $30,000, $1,000,000)
= $937,501.88
2. B. Discount
3. A. Increase because the T-note reaches the maturity
4. 6-month as it is semi-annual