Question

1. Backpack Co. issues 10-year, zero coupon bonds that yield 7 percent. What is the implicit interest income for the first year for these bonds if the face value is $1,000?

   		$35.58
   		$43.93
   		$16.26
   		$8.35

2.

1. A 6 percent coupon rate, $1,000 face value bond matures in 8 years, pays interest semiannually, and has an annual yield to maturity of 5 percent. What is the current market price of the bond?

   		$1,065.28
   		$1,000.00
   		$987.28
   		$1,024.65

Answer 1

1)

Hence, Implicit interest income is $35.58 ($508.35*7%)

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