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padilas [110]
3 years ago
11

Ted's Co. offers a zero coupon bond with an 11.3% yield to maturity. The bond matures in 16 years. What is the current price of

a $1,000 face value bond
Business
1 answer:
Helga [31]3 years ago
3 0

Answer:

Zero-cupon bond= $835.45

Explanation:

Giving the following information:

Face value= $1,000

YTM= 11.3%

Years to maturity= 16 years

<u>To calculate the price of the bond, we need to use the following formula:</u>

<u></u>

Zero-cupon bond= [face value/(1+i)^n]

Zero-cupon bond= 1,000 / (1.113^16)

Zero-cupon bond= $835.45

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