A 10-year government bond has a face value of £100 and an annual coupon rate of 5%. Assume that  the interest rate is equal to 6% per year.  (a) Calculate the bond’s present value if it pays the interest annually, and also the present value if  it pays semi-annually.  (b) Calculate the market price of the bond when the interest rate changes to 8%   please explain it on a paper with formula, not by excel.

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Treasury Market

On-the-run securities are the most recently issued securities in the market depth and are therefore traded at some premium. The off-the-run securities are the ones issued just before the most recent ones. The on-the-run securities have a lower yield to the investor than the off-the-run securities.