What should be the initial price of the bond

Assignment Help Finance Basics

Reference no: EM131924977

Question: A 25-year, $1,000 par value zero-coupon rate bond is to be issued to yield 6 percent. Use Appendix B for an approximate answer but calculate your final answer using the formula and financial calculator methods.

a. What should be the initial price of the bond? (Assume annual compounding. Do not round intermediate calculations and round your answer to 2 decimal places.)

b. If immediately upon issue, interest rates dropped to 5 percent, what would be the value of the zero-coupon rate bond? (Assume annual compounding. Do not round intermediate calculations and round your answer to 2 decimal places.)

c. If immediately upon issue, interest rates increased to 11 percent, what would be the value of the zero-coupon rate bond? (Assume annual compounding. Do not round intermediate calculations and round your answer to 2 decimal places.)

Reference no: EM131924977

Questions Cloud

What is the current price of the bond in given problem : 25 years ago, Mini Max Inc. issued 30 year to maturity zero-coupon bonds with a par value of $1,000. Now the bond has a yield to maturity of 7.22 percent.

What is the expected exchange rate : Annualized interest rates in the U.S. and France on January 1, 1991 are 9% and 13%, respectively. The spot value of the franc is 0.1109 per dollar.

Analyze the writing of the stories : Analyze the writing of the stories(at least 5) to determine the sex of the speaker.

What is the beta of cher portfolio : Cher owns a portfolio that has a value of 67,200 dollars and consists of 3 stocks. She has 23,400 dollars worth of stock A, which has a beta of 0.3.

What should be the initial price of the bond : What should be the initial price of the bond? (Assume annual compounding. Do not round intermediate calculations and round your answer to 2 decimal places.)

Identify the specific experimental research design used : Identify the specific experimental research design used in the study. Describe how the researchers applied ethical principles in the research study.

Discuss the issue and the key peoples impact on theory : Explore the field of human services with emphasis on its history and the effects, both positive and negative, it has had on people.

Discuss about the social media and todays youth : It is important that you have at least 10 scholarly articles in this section. Research articles must be within 5-7 years, and must be short articles.

What is the stock growth rate : GMX Corporation's stock is selling for $40 in the market. The company's beta is 0.8, the market risk premium is 6%, and the risk-free rate is 9%.

User Account

All Pages