Zero-coupon bond. Wesley Company will issue a zero-coupon bond this coming month. The projected bond yield is 10%. If the par value is $1,000, what is the bond' price using a semiannual convention if a. the maturity is 20 years? b. the maturity is 40 years? c. the maturity is 50 years? d. the maturity is 100 years?
Zero-coupon bond. Wesley Company will issue a zero-coupon bond this coming month. The projected bond yield is 10%. If the par value is $1,000, what is the bond' price using a semiannual convention if a. the maturity is 20 years? b. the maturity is 40 years? c. the maturity is 50 years? d. the maturity is 100 years?
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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Please see attached. Definitions:
Zero-coupon bond is a bond that pays no coupons over its maturity.
Yield to maturity (YTM) is the return the bond holder receives on the bond if held to maturity.
Par value is the principal amount to be repaid at the maturity of the bond.
Maturity date is the expiration date of the bond on which the final interest payment is made as well as the principal repayment.
Transcribed Image Text:**Zero-coupon bond.** Wesley Company will issue a zero-coupon bond this coming month. The projected bond yield is 10%. If the par value is $1,000, what is the bond's price using a semiannual convention if:
- a. the maturity is 20 years?
- b. the maturity is 40 years?
- c. the maturity is 50 years?
- d. the maturity is 100 years?
a. What is the price of the bond using a semiannual convention if the maturity is 20 years?
$\text{ } \quad\text{(Round to the nearest cent.)}$
b. What is the price of the bond using a semiannual convention if the maturity is 40 years?
$\text{ } \quad\text{(Round to the nearest cent.)}$
c. What is the price of the bond using a semiannual convention if the maturity is 50 years?
$\text{ } \quad\text{(Round to the nearest cent.)}$
d. What is the price of the bond using a semiannual convention if the maturity is 100 years?
$\text{ } \quad\text{(Round to the nearest cent.)}$
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