Question
18) A 20-year, $1,000 par value zero-coupon rate bond is to be issued to yield 11 percent. UseAppendix Bfor an approximate answer but calculate your
18)
| A 20-year, $1,000 par value zero-coupon rate bond is to be issued to yield 11 percent. UseAppendix Bfor an approximate answer but calculate your final answer using the formula and financial calculator methods. |
| a. | What should be the initial price of the bond?(Assume annual compounding. Do not round intermediate calculations and round your answer to 2 decimal places.) |
| Bond price | $ |
| b. | If immediately upon issue, interest rates dropped to 9 percent, what would be the value of the zero-coupon rate bond?(Assume annual compounding. Do not round intermediate calculations and round your answer to 2 decimal places.) |
| Bond price | $ |
| c. | If immediately upon issue, interest rates increased to 13 percent, what would be the value of the zero-coupon rate bond?(Assume annual compounding. Do not round intermediate calculations and round your answer to 2 decimal places.) |
| Bond price | $ |
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Fundamentals of Investments, Valuation and Management
Authors: Bradford Jordan, Thomas Miller, Steve Dolvin
8th edition
1259720697, 1259720691, 1260109437, 9781260109436, 978-1259720697
