Asked by
JACKLYN NAGLE
on Dec 09, 2024
Verified
This morning Tim purchased a 15-year, $1,000 face value zero-coupon bond for $394.34. Assume the yield-to-maturity remains constant over the life of the bond. What price should Tim receive for his bond if he wants to sell it 4 years from today?
A) $505.40
B) $515.60
C) $544.44
D) $555.85
E) $561.33
Yield-To-Maturity
The total return anticipated on a bond if the bond is held until its maturity date, considering all interest payments and the principal repayment.
Zero-Coupon Bond
A debt security that doesn't pay periodic interest but is issued at a substantial discount to its face value, maturing at that face value.
Face Value
The nominal or dollar value printed on a bond, stock, or other financial instrument, representing the value at issuance and the value to be repaid at maturity.
- Illustrate the traits of zero-coupon bonds and figure their cost at different intervals.
- Estimate the value of bonds in the face of diverse market environments, taking note of interest rate differences and the pending maturity date.
Verified Answer
OC
Learning Objectives
- Illustrate the traits of zero-coupon bonds and figure their cost at different intervals.
- Estimate the value of bonds in the face of diverse market environments, taking note of interest rate differences and the pending maturity date.