Homework Answers
1. Zero-Coupon Bond Formula
The formula for calculating the yield to maturity on a zero-coupon bond is:
Yield To Maturity=(Face Value/Current Bond Price)^(1/Years To Maturity)−1
=(2500/2098.42)^(1/7)-1
=0.02533
Yield = 2.53%
Bond prices and yields move in opposite direction. Since, bond prices reduced, yield will go up.
New Yield =(Face Value/Current Bond Price)^(1/Years To Maturity)−1
=(2500/1947.66)^(1/7)-1
=0.0363
New Yield = 3.63%
As per the guidelines, there are multiple questions and a particular question has not been asked, hence I m answering the first question.
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my question is Q 29, zero coupon bonds ( part b and c continue on next...
my question is Q 29, zero coupon bonds ( part b and c continue
on next page), thank you so much !
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my question is Q 29, zero coupon bonds ( part b and c continue
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