Register
What is the current price of a zero-coupon bond with a 7 percent yield to maturity that matures in 20 years?​
219,816 views
11 votes
11 votes
What is the current price of a zero-coupon bond with a 7 percent yield to maturity that matures in 20 years?​

User Gourneau
by
3.0k points

1 Answer

10 votes
10 votes

Answer: $416.67

Explanation: Assuming that the bond pays interest annually, and the maturity value of the bond is $1000, the price of the bond can be computed using the simple interest formula:

FV/(1 + r*t)

Where:

FV = Future value: $1000

R = Rate: 7%
T = Time: 20

Plugging these values we get:

$1000/(1+7%*20) = $416.67

User Eminsenay
by
2.3k points
Ask a Question
Welcome to QAmmunity.org, where you can ask questions and receive answers from other members of our community.

1.6m questions

2.0m answers

Other Questions

If the rate of inflation in Japan dramatically increases while the rate of inflation in the United States remains constant, then a. the demand curve for dollars shifts to the left. b. the demand curve
If you buy a one-year bond for $4,000 and the issuer pays you back $5,000 at the end of one year, the interest rate on the bond is
Kylie is risk averse and has $1,000 with which to make a financial investment. She has three options. Option A is a risk-free government bond that pays 5 percent interest each year for two years. Option
From the standpoint of the issuing company, a disadvantage of using bonds as a means of long-term financing is that Group of answer choices bond interest is deductible for tax purposes. interest must be
In January of the current year, Dora made a gift of stock to her granddaughter. At the time of the gift, the stock was worth $15,000. Several months later in the same year after the gift, a $500 dividend
Link Copied!