Homework Question Finance

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 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?

Jul 7th, 2015

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solution


215.00 = 1000/(1+r)^22

r = 0.0762642376

po = 215.00
P1 = 1000/(1+0.0762642376)^20 = 229.94

implicit interest in first year =229.94 - 215.00 = 14.9 


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Jul 7th, 2015

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