Suppose you purchase a zero coupon bond with a face
value of $1,000, maturing in 22 years, for $215.00. 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?
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215.00 = 1000/(1+r)^22
r = 0.0762642376
po = 215.00P1 = 1000/(1+0.0762642376)^20 = 229.94
implicit interest in first year =229.94 - 215.00 = 14.9
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