Question
A 16-year, $1,000 par value zero-coupon rate bond is to be issued to yield 6 percent. Use Appendix B for an approximate answer but calculate
| A 16-year, $1,000 par value zero-coupon rate bond is to be issued to yield 6 percent. Use Appendix B for 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 5 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 10 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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HBR Guide To Finance Basics For Managers
Authors: Harvard Business Review
1st Edition
1422187306, 978-1422187302
