Question

A zero coupon bond pays no annual coupon interest payments. When it matures at the end...

A zero coupon bond pays no annual coupon interest payments. When it matures at the end of 9 years it pays out $1,000. If Investors wish to earn 4.65% per year on this bond investment, what is the current price of the bond?(Round to the nearest dollar.)

Answer choices:

A. $659

B. $664

C. $661

D. $657

Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

Information provided:

Present value= $1,000

Time= 9 years

Yield to maturity= 4.65%

The price of the bond is calculated by computing the present value of the bond.

The below has to be entered in a financial calculator to compute the present value of the bond:

FV= 1,000

N= 9

I/Y= 4.65

Enter the CPT key and PV to calculate the present value.

The value obtained is 664.27.

Therefore, the price of the bond is $664.

Hence, the answer is option b.

In case of any further queries, kindly comment on the solution

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
A coupon bond pays annual interest, has a par value of $1,000, matures in four years,...
A coupon bond pays annual interest, has a par value of $1,000, matures in four years, has a coupon rate of 10%, and has a yield to maturity of 12%. The current yield on this bond is
A zero-coupon bond is a security that pays no interest, and is therefore bought at a...
A zero-coupon bond is a security that pays no interest, and is therefore bought at a substantial discount from its face value. If the interest rate is 8% with annual compounding how much would you pay today for a zero-coupon bond with a face value of $2,500 that matures in 6 years? Please round your answer to the nearest cent.
A bond with a $1,000 face value and a 9 percent annual coupon pays interest annually....
A bond with a $1,000 face value and a 9 percent annual coupon pays interest annually. The bond matures in 12 years. A. Determine the value of the bond to a friend of yours with a required rate of return of 11%? B. A zero-coupon bond with similar risk is selling for $300. The bond has a face value of $1,000 and matures in 12 years. Your friend asks you which bond she should invest in, the zero coupon bond...
A coupon bond pays annual interest, has a par value of $1,000, matures in 12 years,...
A coupon bond pays annual interest, has a par value of $1,000, matures in 12 years, has a coupon rate of 11%, and has a yield to maturity of 12%. The current yield on this bond I need this to be written step by step Please. If you got a number from somewhere I need to know where it's from.
A "zero coupon bond" (or just "zero") is a bond, that does not pay any interest,...
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....
A government bond matures in 30 years, makes annual coupon payments of 6.0% and offers a...
A government bond matures in 30 years, makes annual coupon payments of 6.0% and offers a yield of 3.7% annually compounded. Assume face value is $1,000 Now suppose that , five year later, the bond yields 2.7% r. What return did the bondholder earn over the 5 years? Group of answer choices: 8.08% 34.10% 41.25% 17.11% 38.60%
MBA Finance: 1. A zero-coupon bond is a security that pays no interest, and is therefore...
MBA Finance: 1. A zero-coupon bond is a security that pays no interest, and is therefore bought at a substantial discount from its face value. If stated interest rates are 5% annually (with monthly compounding) how much would you pay today for a zero-coupon bond with a face value of $1,900 that matures in 8 years? Please round your answer to the nearest hundredth. 2. A financial institution offers a "double-your-money" savings account in which you will have $2 in...
A five-year bond pays annual coupon payments of 10%. The face value of the bond is...
A five-year bond pays annual coupon payments of 10%. The face value of the bond is $1,000 and has a current market price of $1,079.85. The current yield to maturity is 8%. (15m) Calculate the Duration (D) of this bond by completing the table below. Show all working. Suppose that the interest rates increased by 75 basis points as of today. Calculate the percentage and dollar amount change in the price of the bond. Calculate the new price of the...
HW9 #6) Bond A pays annual coupons, pays its next coupon in 1 year, matures in...
HW9 #6) Bond A pays annual coupons, pays its next coupon in 1 year, matures in 12 years, and has a face value of 1,000 dollars. Bond B pays semi-annual coupons, pays its next coupon in 6 months, matures in 13 years, and has a face value of 1,000 dollars. The two bonds have the same yield-to-maturity. Bond A has a coupon rate of 8.46 percent and is priced at 836.24 dollars. Bond B has a coupon rate of 7.72...
Bond A pays annual coupons, pays its next coupon in 1 year, matures in 17 years,...
Bond A pays annual coupons, pays its next coupon in 1 year, matures in 17 years, and has a face value of 1,000 dollars. Bond B pays semi-annual coupons, pays its next coupon in 6 months, matures in 15 years, and has a face value of 1,000 dollars. The two bonds have the same yield-to-maturity. Bond A has a coupon rate of 9.28 percent and is priced at 998.32 dollars. Bond B has a coupon rate of 9.62 percent. What...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT