Question
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
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?
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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International Finance Theory And Policy
Authors: Paul R. Krugman, Maurice Obstfeld, Marc J Melitz,
11th Edition
013451954X, 9780134519548
