Question
A 15-year, $1,000 par value zero-coupon rate bond is to be issued to yield 8 percent. Use Appendix B for an approximate answer but calculate
A 15-year, $1,000 par value zero-coupon rate bond is to be issued to yield 8 percent. Use Appendix B for an approximate answer but calculate your final answer using the formula and financial calculator methods.
- What should be the initial price of the bond?
Note: Assume annual compounding. Do not round intermediate calculations and round your answer to 2 decimal places.
Bond price. $315.24. selected answer correct
- If immediately upon issue, interest rates dropped to 7 percent, what would be the value of the zero-coupon rate bond?
Note: Assume annual compounding. Do not round intermediate calculations and round your answer to 2 decimal places.
Bond price. $362.45. selected answer correct
- If immediately upon issue, interest rates increased to 10 percent, what would be the value of the zero-coupon rate bond?
Note: Assume annual compounding. Do not round intermediate calculations and round your answer to 2 decimal places.
bond price _______
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Derivatives Markets
Authors: Robert L. McDonald
2nd Edition
032128030X, 978-0321280305
