Question

You are purchasing a 30-year, zero-coupon bond. The yield to maturity is 8.68 percent and the face value is $1,000. What is the current market price?

Answer 1

Current price = $82.32

--------------------------------------------------------------------------------------------------------------------------

Zero coupon bond pays no coupon.

PV of bond = Face vale/(1 + required rate)^years to maturity

Let's put all the values in the formula

= 1000/ (1 + 0.0868)^30

= 1000/ (1.0868)^30

= 1000/ 12.1476

= $82.32

--------------------------------------------------------------------------------------------------------------------------

Feel free to comment if you need further assistance J

Pls rate this answer if you found it useful.