A zero-coupon bond is a bond where investors do not receive any periodic coupon payments. Instead, investors pay a discount price to the par value, and receive the par value when the bond matures. That's why zero-coupon bond is also called pure-discount bond. Company XYZ has a zero-coupon bond with par value of $1,000 that will mature in 20 years. Assuming that the YTM on this bond will remain constant @ 7.62%, what will the bond price be at the end of year 16?
A zero-coupon bond is a bond where investors do not receive any periodic coupon payments. Instead, investors pay a discount price to the par value, and receive the par value when the bond matures. That's why zero-coupon bond is also called pure-discount bond. Company XYZ has a zero-coupon bond with par value of $1,000 that will mature in 20 years. Assuming that the YTM on this bond will remain constant @ 7.62%, what will the bond price be at the end of year 16?
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
Section: Chapter Questions
Problem 1PS
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A zero-coupon bond is a bond where investors do not receive any periodic coupon payments. Instead, investors pay a discount price to the par value, and receive the par value when the bond matures. That's why zero-coupon bond is also called pure-discount bond.
Company XYZ has a zero-coupon bond with par value of $1,000 that will mature in 20 years. Assuming that the YTM on this bond will remain constant @ 7.62%, what will the
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Step 1
The bond that does not pay any interest on maturity is referred to as a zero-coupon bond
the interest on the investment on the zero-coupon bond is the difference of purchased price and the par value
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