Question

Consider a zero-coupon bond with a $1000 face value and 10 years left until maturity with annual compounding. If the YTM of this bond is 10.4%, then the price of this bond is closest to:

Answer 1

$372

Step-by-step explanation:

FV = 1000

Ytm=10.4%=0.104

N=10

Compute FV

FV=X(1+i)^-n

FV=1000(1+0.104)^-10

FV=1000(1.104)^-10

FV= 1000(0.3717)

FV=371.799

FV=372

The price closest to the bond is $372