Question

You are purchasing a 20-year, zero-coupon bond. the yield to maturity is 8.68 percent and the face value is $1,000. what is the current market price?

Answer 1

The answer is "$182.8".

Step-by-step explanation:

yield to maturity = 8.68 % = 0.0868

face value = $1,000

time period = 20 years

We can solve this by using the formula;

P = $1000/(1 + 0.0868/2)²⁰ˣ²

P = $1000/(1.0434)⁴⁰

P = $1000/5.47

P = $182.8