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A zero coupon bond has a maturity of 11 years. If the annual yield to maturity...

A zero coupon bond has a maturity of 11 years. If the annual yield to maturity is 8.1%, what is the current price of this bond? (Answer to the nearest penny, i.e. 999.99 but do not use a $ sign)

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Answer #1

Information provided:

Par value= future value= $1,000

Time= 11 years

Yield to maturity= 8.10%

The price of the bond is computed by calculating the present value of the bond.

The present value is computed by entering the below in a financial calculator:

FV= 1,000

N= 11

I/Y= 8.10

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

The value obtained is 424.54.

Therefore, the price of the bond is 424.54.

In case of any query, kindly comment on the solution

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