Question

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which of the following risk-free zero-coupon bonds could be bought for the lowest price? A. one...

which of the following risk-free zero-coupon bonds could be bought for the lowest price?
A. one with a face value of $1,000 a ytm of 6.2% and 18 years to maturity
B. one with a face value of $1,000 a ytm of 7.8% and 15 years to maturity
C. with a face value of $1,000 a ytm of 6.8% and 18 years to maturity
D.one with a face value of $1,000 a ytm of 5.9% and 20 years to maturity

Solutions

Expert Solution

Value of Bond A = 1,000/(1.062)¹⁸ = $338.66

Value of Bond B = 1,000/(1.078)¹⁵ = $324.13

Value of Bond C = 1,000/(1.068)¹⁸ = $306.00

Value of Bond D = 1,000/(1.059)²⁰ = $317.75

So,

Bond C has lowest

jeff jeffy answered 2 years ago
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