Question 6 (of 7 value 10.00 points You find a zero coupon bond with a par value

Question

Question 6 (of 7 value 10.00 points You find a zero coupon bond with a par value of $10,000 and 14 years to maturity. The yield to maturity on this bond is 5.1 percent. Assume semiannual compounding periods. What is the price of the bond? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Price References eBook & Resources Learning Objective: 07-02 Bond values and yields and why they fluctuate Worksheet Difficulty: Basic Section: 7.4 Some Different Types of Bonds Type here to search

Explanation / Answer

Zero coupon has no coupon payments, it pays the principal amount in the last year

so we need to calculate the present value of that last payment to find out the price

so price = principal / ((1+yield to maturity)^maturity)

= 10000/((1+.051/2)^28) = $ 4940.85

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