Question

You find a zero coupon bond with a par value of $10,000 and 30 years to maturity. The yield to maturity on this bond is 5.2 percent. Assume semiannual compounding periods. What is the price of the bond? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

Answer 1

Answer:

The price of the bond is 2143,67

Explanation:

A zero coupon bond is a bond that does not pay coupon payments and instead pays one lump sum at maturity.

Zero coupon bond value= F/(1+r)^t

F = face value or a par value

r= rate of yield per period

t= time to maturity ( in periods)

Replacing

F = $10,000

We assume semiannual compounding periods

r= 5.2/2=2.6

t= 30 x 2=60

Zero coupon bond value= $10,000/(1+0.026)^60

Value = 2143,67