Question
On January 15st of 2019 Alexander buys a one-year zero coupon bond with a face value of $100. The bond has a yearly return of
-
On January 15st of 2019 Alexander buys a one-year zero coupon bond with a face value of $100. The bond has a yearly return of 1.89% according to Bank of Canada website.
-
a) What is the price of the Bond?
-
b) What if instead of a one-year bond Alexander would have purchased a zero-
coupon bond with a maturity of 2-year, and with a yearly yield to maturity equal
to 2.25%. What is the price of the 2-years zero-coupon bond?
-
c) Alexander sells the bond after one year. The annual yield to maturity of the second bond increased to 3% in the meantime. Calculate the price of the bond (the bond is now one year before maturity). What is the yearly gain for
Alexander?
On January 15st of 2019 Alexander buys a one-year zero coupon bond with a face value of $100. The bond has a yearly return of 1.89% according to Bank of Canada website.
-
a) What is the price of the Bond?
-
b) What if instead of a one-year bond Alexander would have purchased a zero-
coupon bond with a maturity of 2-year, and with a yearly yield to maturity equal
to 2.25%. What is the price of the 2-years zero-coupon bond?
-
c) Alexander sells the bond after one year. The annual yield to maturity of the second bond increased to 3% in the meantime. Calculate the price of the bond (the bond is now one year before maturity). What is the yearly gain for
Alexander?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started
Using Microsoft Excel And Access 20 For Accounting
Authors: Glenn Owen
5th Edition
133751229X, 9781337512299
