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    Bonds, market interest rate, percent per annum

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    Consider three zero-coupon,$1,000 face-value bonds. Bond A matures one year from today, Bond B matures five years from today, and Bond C matures ten years from today. The current market interest rate is 11 percent per annum (effective annual yield).
    a. What is the current price of each bond?

    b. If the market interest rate suddenly rises to 14 percent per annum (effective annual yield), what will be the price of each of these bonds?

    c. Which bond experienced the greatest percentage change in price?

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    Solution Summary

    This solution is comprised of a detailed explanation to answer what is the current price of each bond.