The current zero-coupon yield curve for risk-free bonds is as follows: Maturity (years) 2 1 4.97% YTM 5.53% What is the price per $100 face value of a two-year, zero-coupon, risk-free bond? 3 5.76% The price per $100 face value of the two-year, zero-coupon, risk-free bond is $ 4 5.96% 5 6.04% (Round to the nearest cent.)
The current zero-coupon yield curve for risk-free bonds is as follows: Maturity (years) 2 1 4.97% YTM 5.53% What is the price per $100 face value of a two-year, zero-coupon, risk-free bond? 3 5.76% The price per $100 face value of the two-year, zero-coupon, risk-free bond is $ 4 5.96% 5 6.04% (Round to the nearest cent.)
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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![### Zero-Coupon Yield Curve for Risk-Free Bonds
The current zero-coupon yield curve for risk-free bonds is presented in the table below:
| Maturity (years) | Yield to Maturity (YTM) |
|------------------|-------------------------|
| 1 | 4.97% |
| 2 | 5.53% |
| 3 | 5.76% |
| 4 | 5.96% |
| 5 | 6.04% |
#### Calculation Task
We aim to determine the price per $100 face value of a two-year, zero-coupon, risk-free bond.
**Calculation Formula:**
To find the price of a zero-coupon bond:
\[ \text{Price} = \frac{\text{Face Value}}{(1 + \text{YTM})^{\text{Maturity}}} \]
Where YTM is expressed as a decimal (i.e., 5.53% as 0.0553).
#### Answer Section
The price per $100 face value of the two-year, zero-coupon, risk-free bond is $____. (Round to the nearest cent.)](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F3f8a7250-9137-47ef-be98-4b87422d4696%2F45317119-c788-43ef-9243-3a4fde1c056c%2Fd2v8fqk_processed.jpeg&w=3840&q=75)
Transcribed Image Text:### Zero-Coupon Yield Curve for Risk-Free Bonds
The current zero-coupon yield curve for risk-free bonds is presented in the table below:
| Maturity (years) | Yield to Maturity (YTM) |
|------------------|-------------------------|
| 1 | 4.97% |
| 2 | 5.53% |
| 3 | 5.76% |
| 4 | 5.96% |
| 5 | 6.04% |
#### Calculation Task
We aim to determine the price per $100 face value of a two-year, zero-coupon, risk-free bond.
**Calculation Formula:**
To find the price of a zero-coupon bond:
\[ \text{Price} = \frac{\text{Face Value}}{(1 + \text{YTM})^{\text{Maturity}}} \]
Where YTM is expressed as a decimal (i.e., 5.53% as 0.0553).
#### Answer Section
The price per $100 face value of the two-year, zero-coupon, risk-free bond is $____. (Round to the nearest cent.)
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