Homework Question help Needed

User Generated

Ryyrel

Business Finance

Description

A zero coupon bond has a face value of $1,000 and matures in 4 years. Investors require a (n) 6.1% annual return on these bonds. What should be the selling price of the bond? (Round to the nearest cent)

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Explanation & Answer

Thank you for the opportunity to help you with your question!

A zero coupon bond is a bond that makes no periodic interests but it is sold at a discount from face value.

 Selling price =M/(1+r)^n

   where ;M=maturity value.

              r=investor required anual yield /2

             n=number of years till maturity


price=1000*(1+0.0305)^4=1127.6958

to the nearest cents=1127.70


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Anonymous
Just what I was looking for! Super helpful.

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