Question

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?

Answer 1

$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