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Gary Jones has identified a zero coupon bond for investment in one of his portfolios. With...


Gary Jones has identified a zero coupon bond for investment in one of his portfolios. With a face value of $1,000, a final ma
Gary Jones has identified a zero coupon bond for investment in one of his portfolios. With a face value of $1,000, a final ma
Gary Jones has identified a zero coupon bond for investment in one of his portfolios. With a face value of $1,000, a final ma
Gary Jones has identified a zero coupon bond for investment in one of his portfolios. With a face value of $1,000, a final maturity of 15 years and a current market interest rate (YTM) of 3.65%, he is computing the fair price that he should pay today. If he assumes semi-annual compounding, the price of the bond should be $ (Select) 4. If the market interest rate (YTM) does not change, the value of the bond will [Select] >
Gary Jones has identified a zero coupon bond for investment in one of his portfolios. With a face value of $1,000, a final maturity of 15 years and a current market interest rate (YTM) of 3.65%, he is computing the fair price that he should pay today. If he assumes semi-annual compounding, the price of the bond should be [Select ] If the 584.06 market interest rate (YTM) 341.12 e bond will 581.26 [Select]
Gary Jones has identified a zero coupon bond for investment in one of his portfolios. With a face value of $1,000, a final maturity of 15 years and a current market interest rate (YTM) of 3.65%, he is computing the fair price that he should pay today. If he assumes semi-annual compounding, the price of the bond should be $ [Select] 4. If the market interest rate (YTM) does not change, the value of the bond will ✓ [Select] Not Change Increase Decrease
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Answer #1

Answer:

Part 1: We will use the financial calculator to compute the present value:

N = 30 (converted from annually to semiannually)

I/Y = 1.825% (Converted from annually to semiannually rate)

PMT = 0

FV = $1000

PV = $581.26

Option 3

Part 2: In this case, value will not change as YTM does not change. I am assuming that we are taking as of today.

But If the time period decrease and YTM remains same, value of the bond will increase as bond will reach to the face value.

If you have any questions, please post in comments section.

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