Consider a 4-year, $1000 par value bond with zero coupons. If the yield to maturity is...

Question

Question

business finance

Answer 1

Answer #1

Price of Zero Coupon Bond at YTM of 10% = 1,000/(1.10)⁴ = $683.01

Price of Zero Coupon Bond at YTM of 10% = 1,000/(1.12)⁴ = $635.52

Change in Price = (635.52 - 683.01)/683.01

Change in Price = -6.95%

Answer 2

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