Question

What is the dollar price of a zero coupon bond with 21 years to maturity, semiannual compounding, and a par value of $1,000, if the YTM is:

Answer 1

Answer:

Zero-cupon bond= $192.57

Explanation:

Giving the following information:

Number of periods to maturity= 21*2= 42 semesters

Par value= $1,000

I will assume a yield to maturity of 8%. 4% semestral.

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

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

Zero-cupon bond= [1,000 / (1.04^42)]

Zero-cupon bond= $192.57