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Business & Finance
Tutor: None Selected Time limit: 1 Day

Suppose you purchase a zero coupon bond with a face value of $1,000, maturing in 19 years, for $213.95. Zero coupons pays the investor the face value of the maturity date. What is the implicit interest in the first year of the bonds life?

Jul 7th, 2015

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

we have to find the rate that makes 213.95 to grow to 1000 in 19 years

1000 = [213.95*19]/x

x= 4065.05/1000

x= 4.06%

and 4.06% of 213.95 is

A= [213.95/100]*4.06

A= 8.68 $   implicit interest in the first year of the bonds life

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Jul 7th, 2015

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Jul 7th, 2015
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Jul 7th, 2015
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