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Problems 63-66 involve zero-coupon bonds. A zero-coupon bond is a bond that is sold now at a discount and will pay its face value at the time when it matures; no interest payments are made. 63. Zero-Coupon Bonds A zero-coupon bond can redeemed in 20 years for $10,000. How much should you be willing to pay for it now if you want a return of: (a) 10% compounded monthly? (b) 10% compounded continuously? 64. Zero-Coupon Bonds A child's grandparents are considering buying a $40,000 face-value, zero-coupon bond at birth so that she will have money for her college education 17 years later. If they want a rate of return of 8% compounded annually, what should they pay for the bond? be 65. Zero-Coupon Bonds How much should a $10,000 face- value, zero-coupon bond, maturing in 10 years, be sold for now if its rate of return is to be 8% compounded annually? 66. Zero-Coupon Bonds If Pat pays $12,485.52 for a $25,000 face-value, zero-coupon bond that matures in 8 years, what is his annual rate of return?

Problems 63-66 involve zero-coupon bonds. A zero-coupon bond is a bond that is sold now at a discount and will pay its face value at the time when it matures; no interest payments are made. 63. Zero-Coupon Bonds A zero-coupon bond can redeemed in 20 years for $10,000. How much should you be willing to pay for it now if you want a return of: (a) 10% compounded monthly? (b) 10% compounded continuously? 64. Zero-Coupon Bonds A child's grandparents are considering buying a $40,000 face-value, zero-coupon bond at birth so that she will have money for her college education 17 years later. If they want a rate of return of 8% compounded annually, what should they pay for the bond? be 65. Zero-Coupon Bonds How much should a $10,000 face- value, zero-coupon bond, maturing in 10 years, be sold for now if its rate of return is to be 8% compounded annually? 66. Zero-Coupon Bonds If Pat pays $12,485.52 for a $25,000 face-value, zero-coupon bond that matures in 8 years, what is his annual rate of return?

Essentials Of Investments
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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Problems 63-66 involve zero-coupon bonds. A zero-coupon bond is a bond that is sold now at a discount and will pay its face value at the time when it matures; no interest payments are made.
Transcribed Image Text:Problems 63-66 involve zero-coupon bonds. A zero-coupon bond is a bond that is sold now at a discount and will pay its face value at the time when it matures; no interest payments are made.
63. Zero-Coupon Bonds A zero-coupon bond can redeemed in 20 years for $10,000. How much should you be willing to pay for it now if you want a return of: (a) 10% compounded monthly? (b) 10% compounded continuously? 64. Zero-Coupon Bonds A child's grandparents are considering buying a $40,000 face-value, zero-coupon bond at birth so that she will have money for her college education 17 years later. If they want a rate of return of 8% compounded annually, what should they pay for the bond? be 65. Zero-Coupon Bonds How much should a $10,000 face- value, zero-coupon bond, maturing in 10 years, be sold for now if its rate of return is to be 8% compounded annually? 66. Zero-Coupon Bonds If Pat pays $12,485.52 for a $25,000 face-value, zero-coupon bond that matures in 8 years, what is his annual rate of return?
Transcribed Image Text:63. Zero-Coupon Bonds A zero-coupon bond can redeemed in 20 years for $10,000. How much should you be willing to pay for it now if you want a return of: (a) 10% compounded monthly? (b) 10% compounded continuously? 64. Zero-Coupon Bonds A child's grandparents are considering buying a $40,000 face-value, zero-coupon bond at birth so that she will have money for her college education 17 years later. If they want a rate of return of 8% compounded annually, what should they pay for the bond? be 65. Zero-Coupon Bonds How much should a $10,000 face- value, zero-coupon bond, maturing in 10 years, be sold for now if its rate of return is to be 8% compounded annually? 66. Zero-Coupon Bonds If Pat pays $12,485.52 for a $25,000 face-value, zero-coupon bond that matures in 8 years, what is his annual rate of return?
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