A 16-year, $1,000 par value zero-coupon rate bond is to be issued to yield 6 percent. Use Append calculate your final answer using the formula and financial calculator methods. a. What should be the initial price of the bond? (Assume annual compounding. Do not round intermediate calculations and round your answer to 2 decimal places.) Bond price Answer is complete and correct. $393.65 b. If immediately upon issue, interest rates dropped to 5 percent, what would be the value of the zero-coupon rate bond? (Assume annual compounding. Do not round intermediate calculations and round your answer to 2 decimal places.)

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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A 16-year, $1,000 par value zero-coupon rate bond is to be issued to yield 6 percent. Use Appendix B for an approximate answer but
calculate your final answer using the formula and financial calculator methods.
a. What should be the initial price of the bond? (Assume annual compounding. Do not round intermediate calculations and round
your answer to 2 decimal places.)
Bond price
Answer is complete and correct.
393.65
b. If immediately upon issue, interest rates dropped to 5 percent, what would be the value of the zero-coupon rate bond? (Assume
annual compounding. Do not round intermediate calculations and round your answer to 2 decimal places.)
Answer is complete but not entirely correct.
Bond price
458.11.0
c. If immediately upon issue, interest rates increased to 10 percent, what would be the value of the zero-coupon rate bond? (Assume
annual compounding. Do not round intermediate calculations and round your answer to 2 decimal places.)
Answer is complete but not entirely correct.
Bond price
$
925.93
Transcribed Image Text:A 16-year, $1,000 par value zero-coupon rate bond is to be issued to yield 6 percent. Use Appendix B for an approximate answer but calculate your final answer using the formula and financial calculator methods. a. What should be the initial price of the bond? (Assume annual compounding. Do not round intermediate calculations and round your answer to 2 decimal places.) Bond price Answer is complete and correct. 393.65 b. If immediately upon issue, interest rates dropped to 5 percent, what would be the value of the zero-coupon rate bond? (Assume annual compounding. Do not round intermediate calculations and round your answer to 2 decimal places.) Answer is complete but not entirely correct. Bond price 458.11.0 c. If immediately upon issue, interest rates increased to 10 percent, what would be the value of the zero-coupon rate bond? (Assume annual compounding. Do not round intermediate calculations and round your answer to 2 decimal places.) Answer is complete but not entirely correct. Bond price $ 925.93
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