Find the face value using given data

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Reference no: EM132213950

Question: Consider two bonds: 1) a zero-coupon bond having a face value F and maturity 1 year; 2) a coupon bond with face value F, coupons C = 15 paid annually and maturity 3 years. Assume that the continuously compounded interest rate is 10%.

a) If F = 100, find at the end of which year the price of the second bond will be for the first time below 110?

b) If the price of the second bond is equal to 1.20 times the price of the first bond, find the (common) face value F ? (Round to the nearest thousandth)

Reference no: EM132213950

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