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)

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 2 years ago

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