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You have been given a $1000 face bond that matures in 6 months. It currently sells...

You have been given a $1000 face bond that matures in 6 months. It currently sells for $950. What is the interest rate per year? What will the bond be worth in 3 months? Please show your work!

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Answer #1

AS WE HAVE NOT BEEN PROVIDED WITH COUPONS ASUMING IT IS A ZERO COUPON BOND

What is the interest rate per year?
=(Face Value/Price)^(1/t)-1
=(1000/950)^(1/(6/12))-1
=10.803324%

What will the bond be worth in 3 months? Please show your work!
=Face value/(1+r)^t
=1000/(1+10.803324%)^(3/12)
=974.6794347

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