A 10-year, $1,000 par value, zero-coupon rate bond is to be issued to yield 6 pe
ID: 2661094 • Letter: A
Question
A 10-year, $1,000 par value, zero-coupon rate bond is to be issued to yield 6 percent. Use Appendix B.
What should be the initial price of the bond? (Round "PV Factor" to 3 decimal places and final answer to the nearest dollar amount. Omit the "$" sign in your response.)
If immediately upon issue, interest rates dropped to 5 percent, what would be the value of the zero-coupon rate bond? (Round "PV Factor" to 3 decimal places and final answer to the nearest dollar amount. Omit the "$" sign in your response.)
If immediately upon issue, interest rates increased to 8 percent, what would be the value of the zero-coupon rate bond? (Round "PV Factor" to 3 decimal places and final answer to the nearest dollar amount. Omit the "$" sign in your response.)
(a)What should be the initial price of the bond? (Round "PV Factor" to 3 decimal places and final answer to the nearest dollar amount. Omit the "$" sign in your response.)
Explanation / Answer
a) Price of the bond=$ 558.395
b) Value of the bond =$613.913
c) Value of the bond=$463.193
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