Question

You find a zero coupon bond with a par value of $10,000 and 29 years to maturity. The yield to maturity on this bond is 5.1 percent. Assume semiannual compounding periods. What is the price of the bond? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

Answer 1

$2,321

Step-by-step explanation:

The price of the bond, is it current trading price also known as the present value (PV).

This is calculated as follows :

Fv = $10,000

N = 29 × 2 = 58

i (YTM) = 5.1 %

P/yr = 2

Pmt = $ 0

PV = ?

Thus, using a financial calculator to enter the values as above, price of the bond (PV) is $2,321.30 or $2,321