a. A zero-coupon bond with a par value of $1,000 matures in 10 years. At what price
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a. A zero-coupon bond with a par value of $1,000 matures in 10 years. At what price would this bond provide a yield to maturity that matches the current market rate of 8 percent?
b. What happens to the price of this bond if interest rates fall to 6 percent?
c. Given the above changes in the price of the bond and the interest rate, calculate the bond price elasticity.
MaturityMaturity is the date on which the life of a transaction or financial instrument ends, after which it must either be renewed, or it will cease to exist. The term is commonly used for deposits, foreign exchange spot, and forward transactions, interest... Par Value
Par value is the face value of a bond. Par value is important for a bond or fixed-income instrument because it determines its maturity value as well as the dollar value of coupon payments. The market price of a bond may be above or below par,...
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