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(1 point) Ben Kerr is contemplating buying a zero coupon bond that matures in 10 years and has a face value of $10000. If the

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Answer #1

The amount to paid for the bond is equal to current price of bonds which is equal to present value of face value of bond discounted at yield rate of 4.5% per year for 10 years. The current price of bond is calculated as follows:-

Current Price of Bond = Face Value*Present Value Factor(4.5%.10 yrs)

= $10,000*0.643928 = $6,439.28

Therefore Ben should pay $6,439.28 for the Bond.

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