What is the price of a? zero-coupon ($1,000 par? value) bond that matures in 20 years...

What is the price of a? zero-coupon ($1,000 par? value) bond that matures in 20 years has a promised yield of 12.0?%?

The bonds price is ____? (round to the nearest cent)

Solutions

Expert Solution

Zero coupon bonds does not pay any dividend, it pays the par value of bond at the time of maturity.

Value of bond = Par value/ (1 + yield) ^time

= 1000/ (1 + 0.12) ²⁰

= 1000/ 1.12²⁰

= 1000/ 9.64629

= 103.67

Value of bond is $103.67

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jeff jeffy answered 1 year ago

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