A 5-year, $1,000 par value, zero-coupon rate bond is to be issued to yield 10%. a. What

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A 5-year, $1,000 par value, zero-coupon rate bond is to be issued to yield 10%.

a. What should be the initial price of the bond?

b. If immediately upon issue, interest rates dropped to 8%, what would be the value of the zero-coupon rate bond?

c. If immediately upon issue, interest rates increased to 12%, what would be the value of the zero-coupon rate bond?

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Foundations of Financial Management

ISBN: 978-1259194078

15th edition

Authors: Stanley Block, Geoffrey Hirt, Bartley Danielsen

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Question Posted: Sep 19, 2013 05:27 AM

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A 5-year, $1,000 par value, zero-coupon rate bond is to be issued to yield 10%. a. What

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AComputation of the initial price of the bond Given information Bond Value 1000 Coupon Amount ...View the full answer

Foundations of Financial Management

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