Ten - year zero coupon bonds issued by the U.S. Treasury have a face value of $1,000, and interest is compounded semiannually. If similar bonds in the market yield 9.7 percent, what is the value of these bonds?(Round answer to 2 decimal places, e. g. 15.25.)

Ten - year zero coupon bonds issued by the U.S. Treasury have a face value of $1,000, and interest is compounded semiannually. If similar bonds in the market yield 9.7 percent, what is the value of these bonds?(Round answer to 2 decimal places, e. g. 15.25.)

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter8: Analysis Of Risk And Return

Section: Chapter Questions

Problem 9P

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Concept explainers

Treasury Market

On-the-run securities are the most recently issued securities in the market depth and are therefore traded at some premium. The off-the-run securities are the ones issued just before the most recent ones. The on-the-run securities have a lower yield to the investor than the off-the-run securities.

Question

Definition Definition Calculates the present value of a bond's expected future periodic coupon payments. Bond valuation determines the theoretical fair value of a particular bond and helps investors estimate what rate of return they could expect. The bond's theoretical fair value is computed by discounting the future cash flows or coupon payments by an applicable discount rate.

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