Question

Fill in the table below for the following zero-coupon bonds, all of which have par values of $1,000. Use semi-annual periods. (Do not round intermediate calculations. Round your answers to 2 decimal places.)

	Price Maturity (years) Yield to Maturity $430 20 % $530 20 % $530 10 % 10 10.30 % 10 7.70 % $430 8.30 %

Answer 1

1)

K = N

Bond Price =∑ [(Annual Coupon)/(1 + YTM)^k]     +   Par value/(1 + YTM)^N

k=1

K =20

430 =∑ [(0*1000/100)/(1 + YTM/100)^k]     +   1000/(1 + YTM/100)^20

k=1

YTM% = 4.31

2)

K = N

Bond Price =∑ [(Annual Coupon)/(1 + YTM)^k]     +   Par value/(1 + YTM)^N

k=1

K =20

530 =∑ [(0*1000/100)/(1 + YTM/100)^k]     +   1000/(1 + YTM/100)^20

k=1

YTM% = 3.23

3)

K = N

Bond Price =∑ [(Annual Coupon)/(1 + YTM)^k]     +   Par value/(1 + YTM)^N

k=1

K =10

530 =∑ [(0*1000/100)/(1 + YTM/100)^k]     +   1000/(1 + YTM/100)^10

k=1

YTM% = 6.55

4)

K = N

Bond Price =∑ [(Annual Coupon)/(1 + YTM)^k]     +   Par value/(1 + YTM)^N

k=1

K =10

Bond Price =∑ [(0*1000/100)/(1 + 10.3/100)^k]     +   1000/(1 + 10.3/100)^10

k=1

Bond Price = 375.18

5)

K = N

Bond Price =∑ [(Annual Coupon)/(1 + YTM)^k]     +   Par value/(1 + YTM)^N

k=1

K =10

Bond Price =∑ [(0*1000/100)/(1 + 7.7/100)^k]     +   1000/(1 + 7.7/100)^10

k=1

Bond Price = 476.26

6)

K = N

Bond Price =∑ [(Annual Coupon)/(1 + YTM)^k]     +   Par value/(1 + YTM)^N

k=1

K =N

430 =∑ [(0*1000/100)/(1 + 8.3/100)^k]     +   1000/(1 + 8.3/100)^N

k=1

N(in years) = 10.58