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# Current Price of a Zero, Bond Risk, Next Dividend

36. A zero coupon has a yield to maturity of 9.26% and 8 years until it fully matures. What's the current price of this bond if the face value is \$1,000? Assume semiannual compounding.
a. 458.80
b. 471.20
c. 484.73
d. 503.72

37. Which one of the following bonds has the most interest rate risk?
a. 6%, 20 year
b. 6%, 10 year
c. 0% 10 year
d. 0% 20 year.

38. The common stock of Welsh is spending 28.95 a share and offers a 7.9% rate of return. If the dividend growth rate is constant at 2.5 %, what's the next dividend expected to be?

#### Solution Preview

36. You can solve this in Excel or on your TI calculator. By setting:

FV (the future value of a lump-sum)=\$1,000
PMT (the periodic payment)=\$0
Rate (the effective interest rate per compounding period)=.0926/2=.0463
NPER (the number of compounding ...

#### Solution Summary

36. A zero coupon has a yield to maturity of 9.26% and 8 years until it fully matures. What's the current price of this bond if the face value is \$1,000? Assume semiannual compounding.
a. 458.80
b. 471.20
c. 484.73
d. 503.72

37. Which one of the following bonds has the most interest rate risk?
a. 6%, 20 year
b. 6%, 10 year
c. 0% 10 year
d. 0% 20 year.

38. The common stock of Welsh costs \$28.95 a share and offers a 7.9% rate of return. If the dividend growth rate is constant at 2.5 %, what's the next dividend expected to be?

\$2.19