Your firm offers a 10-year, zero coupon bond. The yield to maturity is 8.8%. What is the current market price ? - current bond market
$ 1,000 face value bonds?
a. $ 430.24
b. $ 473.26
c. $ 835.56
d. $ 919.12
e. $ 1088.00
Sunday, January 24, 2010
Current Bond Market Your Firm Offers A 10-year, Zero Coupon Bond. The Yield To Maturity Is 8.8%. What Is The Current Market Price ?
1 comment:
The issue price of zero-coupon bond is the present value of the nominal value.
The current value of $ 1,000 payable in 10 years = 8.8% ($ 1,000 x 0.43024) = 430.24 $
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To find the factor, with the formula for the present value of $ 1
PV = [1 / (1 + r) ^ n]
= [1 / (1.088) ^ 10]
= 0.43024
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