Homework Answers
The sales (bond price) can be calculated with the use of PV (Present Value) function/formula of EXCEL/Financial Calculator. The function/formula for PV is PV(Rate,Nper,PMT,FV) where Rate = Interest Rate, Nper = Period, PMT = Payment (here, Coupon Payment) and FV = Future Value (here, Face Value of Bonds).
Here, Rate = 2.9% + 2.35% (235 basis points is equal to 2.35%) = 5.25%, Nper = 3, PMT = 0 (becuase it is a zero-coupon bond) and FV = $1,000
Using these values in the above function/formula for PV, we get,
Bond Sales Price Today = PV(5.25%,3,0,1000) = $857.70 (answer)
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