Question
1. BBB Ltd., issued a 20 year zero coupon bond on 1 July 2016. It is now 1 July 2020. The current yield to maturity
1. BBB Ltd., issued a 20 year zero coupon bond on 1 July 2016. It is now 1 July 2020. The current yield to maturity for the bond is 5% p.a.
a. What is the price per $100 for this bond today? (2 marks)
b. If, over the next 12 months market rates for this type of bond were to recover to 4% p.a. what rate of return would an investor who purchased the bond today have earned if they sold the bond on 1 July 2021?
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Contemporary Financial Management
Authors: R. Charles Moyer, James R. Mcguigan, William J. Kretlow
9th Edition
032416470X, 9780324164701
