Illustrative Examples of Treasury Note Investments
An investor wants to purchase Face Value (FV) $3,000 worth of Treasury Notes from Issue No. 21/2016 with coupon (interest) rate of 5.25%. If successful, investor will be paid ( 3000×(5.25%)/2) or $78.75 every six (6) months until the maturity date of 13 July 2026 where he/she will receive final payment of $3,078.75 ($3,000+78.75).
Option A: Investor is interested in investment
Bid Price at Par [$100.00000 per every 100]
Bid Amount = FV⁄100 x Bid Price, so 3000⁄100 x 100 = $3,000
Option B: Investor is very interested in investment
Bid Price at a Premium [$100.40000 per every 100]
Bid Amount = FV⁄100 x Bid Price, so Bid Amount = 3000⁄100 x 100.4 = $3,012
Option C: Investor bids to Win!
Bid Price at deep Premium [$104.51234 per every 100]
Bid Amount = FV⁄100 x Bid Price, so 3000⁄100 x 104.51234 = $3,135.37