Question

A zero coupon bond with a face value of $1,000 is issued with an initial price of $565.01. The bond matures in 20 years. What is the implicit interest, in dollars, for the first year of the bond's life? Assume semiannual compounding.

Answer #1

Implicit interest for 1st six months | $ 8.12 | =565.01*1.4375% |

Implicit interest for 2nd six months | $ 8.24 | =(565.01+8.12)*1.4375% |

Implicit interest for first year |
$ 16.36 |

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_________. (Round to the nearest cent.)

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? (Round to the nearest cent.)

Suppose you purchase a zero coupon bond with a face value of
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$17.24
$17.39
$17.83
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b. If immediately upon issue, interest rates
dropped to 6 percent, what would be the value of the zero-coupon...

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