Question

​(Bond valuation)  Five years ago XYZ International issued some 30​-year ​zero-coupon bonds that were priced with a​ market's required yield to maturity of 8 percent and a par value of ​$1 comma 000. What did these bonds sell for when they were​ issued? Now that 5 years have passed and the​ market's required yield to maturity on these bonds has climbed to 10 ​percent, what are they selling​ for? If the​ market's required yield to maturity had fallen to 6 ​percent, what would they have been selling​ for?

Answer 1

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What did these bonds sell for when they were​ issued
we have to use financial calculator to solve this problem
Put in calculator
FV		1000
PMT		0
I		8%
N		30
Compute PV		($99.38)
therefore bond price =			$99.38
Now that 5 years have passed and the​ market's required yield to maturity on these bonds has climbed to 10 ​percent, what are they selling​ for
we have to use financial calculator to solve this problem
Put in calculator
FV		1000
PMT		0
I		10%
N	=30-5	25
Compute PV		($92.30)
therefore bond price =			$92.30
If the​ market's required yield to maturity had fallen to 6 ​percent, what would they have been selling​ for
we have to use financial calculator to solve this problem
Put in calculator
FV		1000
PMT		0
I		6%
N	=30-5	25
Compute PV		($233.00)
therefore bond price =			$233.00