A newly issued 20-year maturity, zero-coupon bond is issued with a yield to matu

Question

A newly issued 20-year maturity, zero-coupon bond is issued with a yield to maturity of 7.8% and face value $1,000. Find the imputed interest income in the first, second, and last year of the bond's life. (Do not round intermediate calculations. Round your answers to 2 decimal places.)

A newly issued 20-year maturity, zero-coupon bond is issued with a yield to maturity of 7.8% and face value $1,000. Find the imputed interest income in the first, second, and last year of the bond's life. (Do not round intermediate calculations. Round your answers to 2 decimal places.)

Explanation / Answer

Year Remaining Maturity Constant Yield Value1,000/(1.078)^T Imputed Interest(Increase In Constant Yield Value) 0 20 222.65 1 19 240.02 240-222.64 =17.36 2 18 258.74 258.74-240.02=18.72 19 1 927.64 20 0 1000 =1000-927.64 =72.36 Imputed Interest   First year 17.36   Second year 18.72   Last year 72.36

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