There are zero coupon bonds outstanding that have a YTM of 5.91 percent and mature in 20 years. The bonds have a par value of $1

Question

3 years ago

12

0,000. If we assume semiannual compounding, what is the price of the bonds

1 answer:

baherus [9] · Answer 1 · 2022-04-28T13:41:19+03:00

Answer:

$3,119.62

Explanation:

We use the present value formula i.e to be shown in the attached spreadsheet below:

Given that,

Future value = $10,000

Rate of interest = 5.91% ÷ 2 = 2.96%

NPER = 20 years × 2 = 40 years

PMT = $0

The formula is shown below:

= -PV(Rate;NPER;PMT;FV;type)

So, after solving this, the price of the bond is $3,119.62