Question

4T Corp. will issue a zero-coupon bond this coming month. The bond’s projected yield is 6%. If the par value is $1,000 and the maturity is 15 years, What is the bond’s price using semiannual convention?

Answer 1

the price of the bond using semiannual convention is $411.19

Step-by-step explanation:

The computation of the price of the bond using semiannual convention is as follows:

= Par value ÷ (1 + rate of interest)^time period

= $1,000 ÷ (1 + 0.06 ÷ 2)^15 × 2

= $1,000 ÷ (1 + 0.03)^30

= $1,000 ÷ 1.03^30

= $411.19

Hence, the price of the bond using semiannual convention is $411.19

The same is relevant