A zero-coupon bond matures in 10 years and will be worth $1000.00 to the holder. If the bond was purchased 10 years ago, and yielded a return of 5% per year, how much did the holder pay for the bond? (Assume annual compounding, and answer to the nearest cent-$0.01).

Present value= Amount*PVIF(r%,n)

Answered: A zero-coupon bond matures in 10 years…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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CALCULATE THE DIRTY AND CLEAN PRICE!! For a $100 par value 5-year bond with 8% coupons paid semiannually and bought to yield 10% compounded semiannually, calculate the dirty and clean price 2 years and 10 months after the date of purchase, using the semi- theoretical method. Assume that each month has exactly 30 days.
The bond paid $150 per year in coupon interest on the last day of each year (the last payment made today). You intend to hold the bond for three more years and project that 3 for $860. You also project that the bond will continue paying $150 in interest per year. Given the risk associated with the bond, its required rate of return (r ) over the next three years is 9.50 percent. Accordingly, the bond's fair present value is you will be able to sell it at the end of year
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Calculate the price of a zero coupon bond that matures in 10 years if the market interest rate is 6 percent. (Assume semi-annual compounding and $1,000 par value.)

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A zero-coupon bond matures in 10 years and will be worth $1000.00 to the holder.
If the bond was purchased 10 years ago, and yielded a return of 5% per year, how much
did the holder pay for the bond? (Assume annual compounding, and answer to the
nearest cent-$0.01).