Question

A zero-coupon bond matures in 16 years. N a masket descount rate of 19.47% per year and assuming annual compoundma, the price of the bond per 100 of par value is? (round your answer bo two decima places and do mot use a $ sign in your answen)

Answer 1

The price of a zero-coupon bond per 100 of par value with a 16 years maturity and a 19.47% discount rate is approximately 19.59 when rounded to two decimal places.

Step-by-step explanation:

To calculate the price of the zero-coupon bond per 100 of par value, given a market discount rate of 19.47% per year and assuming annual compounding over a period of 16 years, we use the present value formula. The present value (PV) of a zero-coupon bond is calculated by discounting the par value using the formula PV = F / (1 + r)^n, where F is the par value of the bond (which we assume to be 100 for calculation per 100 of value), r is the annual discount rate, and n is the number of years until maturity.

For this bond:

• F = 100
• r = 0.1947
• n = 16

Plugging these values into the formula, we get:

PV = 100 / (1 + 0.1947)^16

This gives us:

PV = 100 / (1.1947)^16

PV = 100 / 5.103739

PV ≈ 19.59

Therefore, the price of the bond per 100 of par value, rounded to two decimal places, is approximately 19.59.