HomeworkLib
Question

You are purchasing a 20-year, zero-coupon bond. The yield to maturity is 8.86 percent and the...

You are purchasing a 20-year, zero-coupon bond. The yield to maturity is 8.86 percent and the face value is $1,000. What is the current market price? Select one: a. $106.67 b. $108.18 c. $182.80 d. $221.50 e. $176.60

business   finance   
0 0
Add a comment Improve this question Transcribed image text
Next > < Previous
Sort answers by oldest

Homework Answers

Answer #1

Face value of the bond = FV = $1000

YTM = 8.86%

Time to maturity in years = 20 years

Time to maturity in semi-annual periods = n = 20*2 = 40

It is a zero-coupon bond. We will use semi-annual compounding to compute the bond's price. Current price is calculated using the formula:

Price of the bond = $176.60 [Rounded to two decimals]

Answer -> $176.60 (Option e)

0 0
Add a comment
Know the answer?
Add Answer to:
You are purchasing a 20-year, zero-coupon bond. The yield to maturity is 8.86 percent and the...
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for? Ask your own homework help question. Our experts will answer your question WITHIN MINUTES for Free.
Similar Homework Help Questions

  • You are purchasing a 14-year, zero-coupon bond. The yield to maturity is 5.94 percent and the...

    You are purchasing a 14-year, zero-coupon bond. The yield to maturity is 5.94 percent and the face value is $1,000. What is the current market price? Assume semi-annual compounding. A. $463.87 B. $382.80 C. $390.77 D. $440.66

  • A.Zero Coupon Bonds A 7 year maturity zero coupon corporate bond has an 8% promised yield....

    A.Zero Coupon Bonds A 7 year maturity zero coupon corporate bond has an 8% promised yield. The bond's price should equal B.The Fishing Pier has 6.40 percent, semi-annual bonds outstanding that mature in 12 years. The bonds have a face value of $1,000 and a market value of $1,027. What is the yield to maturity? C.Bond Yields Find the promised yield to maturity for a 7% coupon, $1,000 par 20 year bond selling at $1115.00. The bond makes semiannual coupon...

  • 4- You are purchasing a 20-year, semi-annual bond with a current market price of $973.64. If...

    4- You are purchasing a 20-year, semi-annual bond with a current market price of $973.64. If the yield to maturity is 8.68 percent and the face value is $1,000, what must the coupon payment be on the bond?

  • Consider the following $1,000 par value zero-coupon bonds: Bond Year to Maturity Yield to Maturity A...

    Consider the following $1,000 par value zero-coupon bonds: Bond Year to Maturity Yield to Maturity A 1 6.10% B 2 5.40% C 3 8.86% D 4 8.78% E 5 12.18% The expected one-year interest rate three years from now should be __________. 9.79 10.79 8.54 7.49

  • A newly issued 20-year maturity, zero-coupon bond is issued with a yield to maturity of 8%...

    A newly issued 20-year maturity, zero-coupon bond is issued with a yield to maturity of 8% and face value of $1,000. If the applicable tax rate is 21% and you own 10 of these bonds, what will be your tax liabilities for the next two years?

  • 1) A $1,000 face value bond currently has a yield to maturity of 6.03 percent. The...

    1) A $1,000 face value bond currently has a yield to maturity of 6.03 percent. The bond matures in thirteen years and pays interest semiannually. The coupon rate is 6.25 percent. What is the current price of this bond? 2) The $1,000 face value bonds of Galaxies International have coupon of 5.5 percent and pay interest semiannually. Currently, the bonds are quoted at 98.02 and mature in 12 years. What is the yield to maturity? 3) Variance Logistics wants to...

  • You purchased a zero coupon bond one year ago for $296.50. The market interest rate is...

    You purchased a zero coupon bond one year ago for $296.50. The market interest rate is now 6.5 percent. If the bond had 15 years to maturity when you originally purchased it, what is your total return to date if the face value of the bond is $1,000? (Hint: Use the information provided to calculate the price of the zero coupon bond today.) A) 37.74 percent B) 27.40 percent C) 23.35 percent D) 19.95 percent E) 32.58 percent

  • d. Assume that you have a one-year coupon bond with a face value of $1,000 and...

    d. Assume that you have a one-year coupon bond with a face value of $1,000 and a coupon payment of $50. What is the price of the bond if the yield to maturity is 6%? e. Assume that you have the same bond is in part d, except instead of paying one annual payment of $50, the bond pays two semi-annual payments of $25 (one six months from now and another payment in twelve months). What is the price of...

  • 19. A bond has 8 years to maturity, a 7 percent coupon, a $1,000 face value,...

    19. A bond has 8 years to maturity, a 7 percent coupon, a $1,000 face value, and pays interest semi-annually. What is the bond's current price if the yield to maturity is 6.97 percent? A. $799.32 B. $848 16 C. $917.92 D. $1,005.46 E. None of the above.l 19. A bond has 8 years to maturity, a 7 percent coupon, a $1,000 face value, and pays interest semi-annually. What is the bond's current price if the yield to maturity is...

  • 37. Consider a five-year bond with a 10% coupon that has a present yield to maturity...

    37. Consider a five-year bond with a 10% coupon that has a present yield to maturity of 8%. If interest rates remain constant, one year from now the price of this bond will be: a) Par b) Higher c) Lower d) The same e) None of the above 38. ABC issued in 2018 a fifteen-year bond with coupon interest rate 4% and €1,000 face value. Today this bond is sold at €900. Which is the bond’s current yield? a) 0.062...

ADVERTISEMENT
Free Homework Help App
Download From Google Play
Scan Your Homework
to Get Instant Free Answers
Need Online Homework Help?
Ask a Question
Get Answers For Free
Most questions answered within 3 hours.
ADVERTISEMENT
ADVERTISEMENT