# Zero coupon bond

A 15 year, $1,000 par value zero-coupon rate bond is to be issued to yield 10%.

a. What should be the initial price of the bond? (Take the present value of $1,000 to be received after 15 years at 10 %, using Appendix B at the back of the text.)

b. If immediately upon issue, interest rates dropped to 8 %, what would be the value of the zero-coupon rate bond?

c. If immediately upon issue, interest rates increased to 12 %, what would be the value of the zero-coupon rate bond?

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A 15 year, $1,000 par value zero-coupon rate bond is to be issued to yield 10 %.

a. What should be the initial price of the bond? (Take the present value of $1,000 to be received after 15 years at 10 %, using Appendix B at the back of the text.)

b. If immediately upon issue, interest ...

#### Solution Summary

This solution is comprised of a detailed explanation to answer what should be the initial price of the bond.