Question

You are purchasing a 30-year, zero coupon bond. The yield to maturity is 9.1 percent and the face value is $1,000. What is the current market price (assume annual coupons)?

Answer 1

Zero-cupon bond= $73.33

Step-by-step explanation:

Giving the following information:

Number of years (n)= 30

Face value= $1,000

YTM= 9.1%

To calculate the bond price, we need to use the following formula:

Zero-cupon bond= [face value/(1+i)^n]

Zero-cupon bond= [1,000 / (1.091^30)

Zero-cupon bond= $73.33