Question about Zero-Coupon Bond
Not what you're looking for?
Please help answer the following problems. Provide step by step calculations.
A 20-year, $1,000 par value zero-coupon rate bond is to be issued to yield 11 percent
a. What should be the initial price of the bond? (Take the present value of 1000 for 20 years, using Appendix B at the back of the text.)
b. If immediately upon issue, interest rates dropped to 9 percent, what would be the value of the zero-coupon rate bond?
c. If immediately upon issue, interest rates increased to 13 percent, what would be the value of the zero-coupon rate bond?
Purchase this Solution
Solution Summary
This solution is comprised of a detailed explanation to answer what should be the price and how would value change. It helps find the initial price of bond and helps calculate the value of zero-compound rate bonds based on changing interest rates. Step by step calculations are provided for each problem.
Solution Preview
See attached file.
Zero-coupon rate bond
A 20-year, $1,000 par value zero-coupon rate bond is to be issued to yield 11 percent
a. What should be the initial price of the ...
Purchase this Solution
Free BrainMass Quizzes
Lean your Process
This quiz will help you understand the basic concepts of Lean.
Situational Leadership
This quiz will help you better understand Situational Leadership and its theories.
Employee Orientation
Test your knowledge of employee orientation with this fun and informative quiz. This quiz is meant for beginner and advanced students as well as professionals already working in the HR field.
Cost Concepts: Analyzing Costs in Managerial Accounting
This quiz gives students the opportunity to assess their knowledge of cost concepts used in managerial accounting such as opportunity costs, marginal costs, relevant costs and the benefits and relationships that derive from them.
Transformational Leadership
This quiz covers the topic of transformational leadership. Specifically, this quiz covers the theories proposed by James MacGregor Burns and Bernard Bass. Students familiar with transformational leadership should easily be able to answer the questions detailed below.