Consider a zero-coupon bond with a $1,000 face value and 10 years left until maturity. If the YTM of this bond is 6.7%, then the price of this bond is closest to: OA. $523.00 OB. $731.95 OC. $627.39 OD. $1,000.00 ...
Consider a zero-coupon bond with a $1,000 face value and 10 years left until maturity. If the YTM of this bond is 6.7%, then the price of this bond is closest to: OA. $523.00 OB. $731.95 OC. $627.39 OD. $1,000.00 ...
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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Transcribed Image Text:Consider a zero-coupon bond with a $1,000 face value and 10 years left until maturity. If the YTM (Yield to Maturity) of this bond is 6.7%, then the price of this bond is closest to:
- A. $523.00
- B. $731.95
- C. $627.39
- D. $1,000.00
Transcribed Image Text:**Problem Statement:**
Sara wants to have $580,000 in her savings account when she retires. How much must she put in the account now, if the account pays a fixed interest rate of 8%, to ensure that she has $580,000 in 25 years' time?
**Options:**
- A. $118,566
- B. $84,690
- C. $97,308
- D. $152,442
Expert Solution
Step 1: Analysis of given data:
1) Face value = FV = $1,000
Period = nper = 10 years
Interest rate = rate = 6.7%
2) Future value = FV = $580,000
Period = 25 years
Interest rate = rate = 8%
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