Maturity and the current market value

Reference no: EM13197194

Question 1:

Calculate the present value of $1,000 zero-coupon bond with 5 years to maturity if the required annual interest rate is 6%.

Question 2:

Consider a bond with a 7% annual coupon and a face value of $1,000. Complete the following table:

Years to Maturity Discount Rate Current Price
_____________________________________________
      3     5
          3                       7
      6           7
          9     7
          9                       9
_____________________________________________

What relationship do you observe between yield to maturity and the current market value?

Years to Maturity Yield to Maturity Current Price
__________________________________________________________________
              3                   5
      3                   7
      6           7
              9           5
      9           9
__________________________________________________________________

Reference no: EM13197194

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