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Calculate the price of second zero coupon bond

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Question - Priscilla will make a 2-year investment using two consecutive 1-year $500,000 zero coupon bonds. The maturity proceeds of the first zero coupon bond will be rolled over into the second zero coupon bond. The purchase yields for the two 1-year zero coupon bonds will be 2.27% and 3.74% p.a., respectively (annual effective rates). Note that any surplus funds after one year can be invested for one year at a rate of 3.86% p.a. Calculate the price of second zero coupon bond. Round your answer to four decimal places.

a. 481974.1662

b. 481417.2925

c. 481970.3007

d. 488901.9263

Reference no: EM133012246

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