You find a zero coupon bond with a par value of $10,000 and 20 years to maturity. The yield to maturity on this bond is...

You find a zero coupon bond with a par value of $10,000 and 20 years to maturity. The yield to maturity on this bond is 4.2 p

You find a zero coupon bond with a par value of $10,000 and 20 years to maturity. The yield to maturity on this bond is 4.2 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.)

Solutions

Expert Solution

Price of bond=Par value/(1+YTM/2)^(2*time period)

=$10,000/(1+0.042/2)^(2*20)

=$10,000/(1.021)^40

=$10,000*0.435482108

=$4354.82(Approx).

jeff jeffy answered 2 years ago

Next > < Previous

Related 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.)

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 purchase a 30-year, SEK 10,000 par value, zero-coupon bond with a yield to maturity...

Suppose you purchase a 30-year, SEK 10,000 par value, zero-coupon bond with a yield to maturity (YTM) of 4.2%. You hold the bond for 5 years before selling it. (a) What is the price of the bond when you buy it? Answer: The price of the bond is SEK . (round to full SEK) (b) If the bond’s yield to maturity drops by 1% when you sell it, what is the internal rate of return of your investment? Answer: If...

Consider the following $1,000 par value zero-coupon bonds: Bond Years until Maturity Yield to Maturity A...

Consider the following $1,000 par value zero-coupon bonds: Bond Years until Maturity Yield to Maturity A 1 7.25 % B 2 8.25 C 3 8.75 D 4 9.25 a. According to the expectations hypothesis, what is the market’s expectation of the one-year interest rate three years from now? (Do not round intermediate calculations. Round your answer to 2 decimal places.) b. What are the expected values of next year’s yields on bonds with maturities of (a) 1 year; (b) 2...

Consider the following $1,000 par value zero-coupon bonds: Bond Years until Maturity Yield to Maturity A...

Consider the following $1,000 par value zero-coupon bonds: Bond Years until Maturity Yield to Maturity A 1 8.50 % B 2 9.50 C 3 10.00 D 4 10.50 a. According to the expectations hypothesis, what is the market’s expectation of the one-year interest rate three years from now? (Do not round intermediate calculations. Round your answer to 2 decimal places.) b. What are the expected values of next year’s yields on bonds with maturities of (a) 1 year; (b) 2...

Find the yield to maturity of a par $10,000 bond selling at $9,800 with semiannual coupon...

Find the yield to maturity of a par $10,000 bond selling at $9,800 with semiannual coupon payments equal to $280 and maturing in 8years. State the formula and substitute the figures in to the formula to derive the correct answer if possible?

A zero-coupon bond has a yield to maturity of 9% and a par value of $1,000....

A zero-coupon bond has a yield to maturity of 9% and a par value of $1,000. By convention, zero bonds are assumed to pay $0 semi-annually. If the bond matures in eight years, the bond should sell for a price of _______ today.v.

A zero-coupon bond has a par value of $1,000 and a yield-to-maturity of 5%. You purchase...

A zero-coupon bond has a par value of $1,000 and a yield-to-maturity of 5%. You purchase the bond when it has exactly 17 years remaining until maturity. You hold the bond for 6 months and then sell it. If the bond's yield-to-maturity is 9% when you sell it, what is your percentage return over this 6-month holding period? When computing bond prices, use a semi-annual compounding period. Enter your answer as a decimal and show 4 decimal places. For example,...

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?

You find a zero coupon bond which is a poor value of $10,000 and 12 years...

You find a zero coupon bond which is a poor value of $10,000 and 12 years to maturity on this bond is 4.9% assuming that is the semi annual compound what is the price worth of this bond how do I go

Subjects