Question

Suppose you purchase a zero coupon bond with a face value of
$1,000, maturing in 18years, for $214.10. Zero coupon bonds pay
the investor the face value on the maturity date. What is the
implicit interest in the first year of the bond's life?

Answer #1

IRR is the Rate at which PV of Cash inflows are equal to PV of Cash Outflows

Year |
CF |
PVF @8% |
Disc CF |
PVF @9% |
Disc CF |

0 | $ -214.10 | 1.0000 | $ -214.10 | 1.0000 | $ -214.10 |

18 | $ 1,000.00 | 0.2502 | $ 250.25 | 0.2120 | $ 211.99 |

NPV | $ 36.15 | $ -2.11 |

IRR = rate at which least +ve NPV + [ NPV at that Rate / Change in NPV due to 1% inc in Rate ] * 1%

= 8% + [ 36.15 / 38.26 ] * 1%

= 8% + [ 0.94 * 1% ]

= 8% + 0.94%

= 8.94%

Suppose you purchase a zero coupon bond with a face value of
$1,000, maturing in 21 years, for $215.00. Zero coupon bonds
pay the investor the face value on the maturity date. What is the
implicit interest in the first year of the bond's life?
The implicit interest in the first year of the bond's life is
? (Round to the nearest cent.)

Suppose you purchase a zero coupon bond with a face value of
$1,000, maturing in 20 years, for $214.55. Zero coupon bonds pay
the investor the face value on the maturity date. What is the
implicit interest in the first year of the bond's life? The
implicit interest in the first year of the bond's life is
_________. (Round to the nearest cent.)

Suppose you purchase a zero-coupon bond with a face value
$1,000, maturing in 16 years, for $670. If the yield to maturity on
the bond remains unchanged, what will be the price of the bond 5
years from now?
Question 15 options:
$759
$778
$797
$816
$835

A zero coupon bond with a face value of $1,000 is issued with an
initial price of $492.96. The bond matures in 15 years. What is the
implicit interest, in dollars, for the first year of the bond's
life? Use semiannual compounding.

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.

Suppose you purchase a zero-coupon bond (coupon = 0%) with a
face value of $1,000 and a maturity of 25 years, for $200. If the
yield to maturity on the bond remains unchanged, what will the
price of the bond be 5 years from now?
$800.00
$253.64
$297.58
$275.95
$267.52

You purchase a zero coupon bond with 22 years to maturity and a
yield to maturity of 5.49 percent. The bond has a par value of
$1,000. What is the implicit interest for the first year? Assume
semiannual compounding

A "zero coupon bond" (or just "zero") is a bond, that does not
pay any interest, it just pays the face value when it matures. Of
course nobody would purchase a bond without interest, that's why
zero coupon bonds are sold at a discount.
Suppose you are given the following information about the
current prices of zero coupon bonds:
bond:
price
1-year zero, face value $1,000
$909.09
2-year zero, face value $1,000
$826.45
3-year zero, face value $1,000
$718.65
I.e....

You purchase a zero coupon bond with 21 years to maturity and a
yield to maturity of 5.53 percent. The bond has a par value of
$1,000. What is the implicit interest for the first year? Assume
semiannual compounding.
$17.24
$17.39
$17.83
$15.60
$17.12

A ten-year zero coupon bond with a face value of $1,000 is
currently priced at 48.72% of the face value. Assume the bond's YTM
remains unchanged throughout the bond's term to maturity. What
should the bond be sold for three years from now?
please explain in detail... if you use financial calculator
please label steps :)

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