Question

A risk-free, zero-coupon bond with a face value of $1,000 has 15 years to maturity. If the YTM is 5.8%, which of the following would be closest to the price this bond will trade at?
a. $721
b. $525
c. $686
d. $429

Answer 1

Answer:

price = $429.25

so correct option is d. $429

Explanation:

given data

face value = $1,000

time = 15 year

rate = 5.8 % = 0.058

to find out

price of bond

solution

we get here price that is express as

price = $\frac{face\ value}{(1+rate)^{time}}$    ........................1

put here value we get price

price = $\frac{1000}{(1+0.058)^{15}}$

price = $429.25

so correct option is d. $429