Hi Bartleby Expert, I'm struggling a bit with zero coupon bonds, as i do not understand why my teacher asks for interest payment every year, as there in my opinion only is one payment by the end, but maybe i am misinterpreting the question at hand. I hope you can help me! The given information is as follows: Peter needs to build a hotel, the amount required for the building is 4 billion dollars. Notethat he is only going to use one type of bond and not a portfolio. Assume Peter receives the amount needed for the construction on January 1st 2022. All the bonds that Peter issues carry an annual interest rate (or yield) of 1.7% A. Calculate the price on January 1st, 2022, and on January 1st, 2025, for a zero‐coupon bond (i.e., a bond with no coupon payments) with payback date of face value on January 1st, 2026. Calculate also the total payment, interest payment, and remaining face value on the 1st of January of every year between 2022, when the bond was issued, and 2026 for this bond.
Hi Bartleby Expert,
I'm struggling a bit with zero coupon bonds, as i do not understand why my teacher asks for interest payment every year, as there in my opinion only is one payment by the end, but maybe i am misinterpreting the question at hand. I hope you can help me!
The given information is as follows:
Peter needs to build a hotel, the amount required for the building is 4 billion dollars. Notethat he is only going to use one type of bond and not a portfolio.
Assume Peter receives the amount needed for the construction on January 1st 2022. All the bonds that Peter issues carry an annual interest rate (or yield) of 1.7%
A. Calculate the price on January 1st, 2022, and on January 1st, 2025, for a zero‐coupon bond (i.e., a bond with no coupon payments) with payback date of face value on January 1st, 2026. Calculate also the total payment, interest payment, and remaining face value on the 1st of January of every year between 2022, when the bond was issued, and 2026 for this bond.
Thank you in advance,
Christian
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