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9. You bought a 20-year, zero coupon bond with a face value of $1,000 and a yield to maturity of 2.5% (Expressed as an EAR
9. You bought a 20-year, zero coupon bond with a face value of $1,000 and a yield to maturity of 2.5% (Expressed as anEAR, youdon'tneed to deal with the simple rate issue.)
Part A
What is the price of the bond today?
Part B
5 years after your initial purchase, you decide to sell the bond. (15 years are now remaining to maturity.) Interest rates have sincerisento 6.5% on 15-year bonds.
What is your personalannual rateof return on holding the bond?
(FYI - Express your percentages as a decimal.)
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