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Sally owns a $1,000-par zero-coupon bond that has six years of remaining a. What is the expected price of the bond at the time of sale?
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6 votes
6 votes
Sally owns a $1,000-par zero-coupon bond that has six years of remaining a. What is the expected price of the bond at the time of sale?

User Wordpressm
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1 Answer

20 votes
20 votes

Answer:

$647.96

Step-by-step explanation:

Sue the following formula to calculate the price of the bond at the time of sale

Price of Bond = Face value of the bond / ( 1 + Market interest rate )^numbers of years

Where

Face value of bond = $1,000

Market interest rate = 7.5%

Numbers of years = 6 years

placing values in the formula

Price of Bond = $1,000 / ( 1 + 7.5% )^6

Price of Bond = $647.96

User Mlschechter
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2.9k points
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