Question

General Electric Incorporated issued a 30 year zero-coupon bond. If comparable AA rated bonds yield 7.8%, what is the price of bond? (Discount at an annual rate) (a) $1,000.00 (b) $ 0.00 (c) $1,050.60 (d) $ 105.06 (e) $ 780.00

Answer 1

d. $105.06

Step-by-step explanation:

Data provided as per the question is below

Bonds yield = 7.8%

Time period = 30 years

The computation of price of bond is shown below:-

Present value factor 7.8% for 30 years × Face value

= 0.10506 × 1,000

= $105.06

Therefore for computing the price of bonds we simply multiply the present value factor with face value.