Question

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)

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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