Gary Jones has identified a zero coupon bond for investment in one of his portfolios. With...

Question

Question

Answer 1

Answer #1

Answer:

Part 1: We will use the financial calculator to compute the present value:

N = 30 (converted from annually to semiannually)

I/Y = 1.825% (Converted from annually to semiannually rate)

PMT = 0

FV = $1000

PV = $581.26

Option 3

Part 2: In this case, value will not change as YTM does not change. I am assuming that we are taking as of today.

But If the time period decrease and YTM remains same, value of the bond will increase as bond will reach to the face value.

If you have any questions, please post in comments section.

Answer 2

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