Ask Question
25 October, 20:25

Your firm offers a 10-year, zero coupon bond (i. e., coupon rate is 0%). The yield to maturity is 8.8 percent. What is the current market price of a $1,000 face value bond?

+3
Answers (1)
  1. 25 October, 20:35
    0
    The correct answer to the following question is $430.241

    Explanation:

    Zero coupon bond which are also know as pure discount bond, are those bonds which are issued at discount and makes no periodic interest payments to the bearer.

    Given information -

    Face value at maturity - $1000

    Yield to maturity - 8.8%

    Number of years till maturity - $10

    Current market price - maturity value / (1 + i) ^n

    where i = yield to maturity, n = Number of years till maturity

    = $1000 / (1+8.8%) ^10

    = $1000 / (1.088) ^10

    = $1000 / 2.32428

    = $ 430.2407

    = $430.241 (approximately)
Know the Answer?
Not Sure About the Answer?
Find an answer to your question 👍 “Your firm offers a 10-year, zero coupon bond (i. e., coupon rate is 0%). The yield to maturity is 8.8 percent. What is the current market ...” in 📗 Business if the answers seem to be not correct or there’s no answer. Try a smart search to find answers to similar questions.
Search for Other Answers