4. If a $1,000 bond pays no coupon interest, matures in 8 years and is priced...

Question

Question

4. If a $1,000 bond pays no coupon interest, matures in 8 years and is priced to yield 6.6%, what is the price of the bond?

Answer 1

Answer #1

Since, it is a zero coupon bond, It is similar to finding present value of $1000 discounted at 6.6% for 8 years

Present Value = Future Value / (1 + Discount rate )^ ^time

Bond Price = 1000 / (1 + 6.6%)^⁸

Bond Price = 1000 / 1.667468496

Bond Price = $ 599.7114801

Answer 2

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