Question
In: Finance
You are considering buying a zero-coupon bond from Big Bend Corporation. The face value (or par)...
You are considering buying a zero-coupon bond from Big Bend Corporation. The face value (or par) of the bond is $10,000, and it matures in 6 years. Assume that the appropriate discount rate is 7.26% per year with annual compounding. Given this discount rate, what is the corresponding price today of this bond? Enter your answer in dollars and cents; round to the penny.
Solutions
Expert Solution
In the case of annual compounding at the end of Every year, interest needs to be capitalized. It means interest should be added to the principal amount.
jeff jeffy answered 2 years agoRelated Solutions
You find a zero coupon bond with a par value of $10,000 and 23 years to...
You find a zero coupon bond with a par value of $10,000 and 23
years to maturity. The yield to maturity on this bond is 4.5
percent. Assume semiannual compounding periods.
What is the price of the bond? (Do not round
intermediate calculations and round your answer to 2 decimal
places, e.g., 32.16.)
You find a zero coupon bond with a par value of $25,000 and 18 years to...
You find a zero coupon bond with a par value of $25,000 and 18
years to maturity.
If the yield to maturity on this bond is 3.9 percent, what is
the dollar price of the bond? Assume semiannual compounding
periods.
What is the bond price?
There is a zero coupon bond that sells for $4,394.80 and has a par value of...
There is a zero coupon bond that sells for $4,394.80 and has a
par value of $10,000. If the bond has 20 years to maturity, what is
the yield to maturity? Assume semiannual compounding.
Multiple Choice
4.20%
4.01%
4.15%
4.05%
3.99%
An investor purchases a bond that does not pay a coupon (zero-coupon) with a face value...
An investor purchases a bond that does not pay a coupon
(zero-coupon) with a face value of $5,000. Assume the bond’s 8.4%
yield to maturity is expected to remain constant over the duration
of the bond’s life. What is the rate of return on his investment,
if he sells this bond ten years later?
Group of answer choices
Not enouh information to answer the question
4.20%
6.72%
5.04%
8.40%
An investor purchases a bond that does not pay a coupon (zero-coupon) with a face value...
An investor purchases a bond that does not pay a coupon
(zero-coupon) with a face value of $5,000. Assume the bond’s 8.4%
yield to maturity is expected to remain constant over the duration
of the bond’s life. What is the rate of return on his investment,
if he sells this bond ten years later?
4.20%
5.04%
8.40%
Not enough information to answer the question
6.72%
1. You find a zero coupon bond with a par value of $10,000 and 17 years...
1. You find a zero coupon bond with a par value of $10,000 and
17 years to maturity. If the yield to maturity on this bond is 4.2
percent, what is the price of the bond? Assume semiannual
compounding periods. (Do not round intermediate calculations and
round your answer to 2 decimal places, e.g., 32.16.)
2. Union Local School District has a bond outstanding with a
coupon rate of 2.8 percent paid semiannually and 16 years to
maturity. The yield...
Suppose you are considering buying a $2,000,000 face value of bond in the secondary market. The...
Suppose you are considering buying a $2,000,000 face value of
bond in the secondary market. The bond was issued in 2016 and is
due in 2036. It is now 2020. In 2016, the appropriate market
interest rate to price the bond was 8%. This bond pays quarterly
interest payments. Currently, other bonds with similar risk
charateristics are being issued into the market with 12% coupons.
How much would you be willing to pay for this bond? Please tell me
the...
Suppose you purchase a zero coupon bond with a face value of $1,000, maturing in 19...
Suppose you purchase a zero coupon bond with a face value of
$1,000, maturing in 19 years, for $215.75. Zero coupon bonds pay
the face value on the maturity date.Whatis the implicit interest in
the first year of the bond's life?
Suppose you purchase a zero coupon bond with a face value of $1,000, maturing in 18...
Suppose you purchase a zero coupon bond with a face value of
$1,000, maturing in 18 years, for $214.70. Zero coupon bonds pay
the investor the face value on the maturity date. What is the
implicit interest in the first year of the bond’s life?
"Suppose you buy a 30 year zero coupon bond with a face value of $1000 and...
"Suppose you buy a 30 year zero coupon bond with a face value of
$1000 and a 4% annual interest rate, compounded semi-annually. 1
minute after you buy the bond, the interest rate on this bond falls
to 3%, compounded semi-annually. What is the percent change in the
bond price?
ADVERTISEMENT
ADVERTISEMENT
Latest Questions
- Draw a DFA for the following ( ∑ = {0,1}): Set of all strings with.
- In the article from Forbes notes that the goal of a leader is not to clone...
- Many people keep time using a 24 hour clock (11 is 11am and 23 is 11pm,...
- UNIX ONLY -- DIFFICULT LAB ASSIGNMENT This is an extremely difficult subject for me. Could you...
- Do you know why your credit card can be refused even though you are profitable?
- The Following Java expression: S/10 * 10 + 10 – S = C Show that this...
- Year Cash Flow 0 −$9,700 1 5,800 2 2,500 3 3,400 &nb
ADVERTISEMENT