1. What is the market price of a Zero Coupon Bond that pays $1,000 face at matur
ID: 2630059 • Letter: 1
Question
1. What is the market price of a Zero Coupon Bond that pays $1,000 face at maturity in 8 years from now?
Current market interest rate (YTM) for such a bond is 9.0% (use semi-annual discounting
2. What is the current market price of a bond paying a 7.0% coupon that matures in 8 years? Current market
interest rate (YTM) now is 5.0% for such bonds. (Treat bond interest as paid semi- annually)
3. What is the market yield-to-maturity (YTM) of a 7% Coupon Bond that pays $1,000 face at maturity in
6 years from now? The current market price of this bond is $880. (use annual discounting,fin. calculator or approximate YTM formula)
4. What is the market price of a 5% Coupon Bond that pays $1,000 face at maturity in 10 years from now?
Current market interest rate (YTM) for such a bond is 8.0% (use semi-annual discounting)
Explanation / Answer
1)
price of zero cpupon bond = 1000/(1+9%/2)^16 = 494.47
2)
price = 45 * PVIFA(5%/2,16) + 1000 * PVIF(5%/2,16)
= 45 *13.055 + 1000 * 0.6736
=1261.08
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.