An n-year zero coupon bond with a par value of $1,000 was purchased for $600. A 2n-year $1000 par value bond with annual coupons of $X was purchased for $850. A 3n-year $1000 part value bond with annual coupons of $X was purchased for $P. All 3 bonds have the same yield rate. Compute P.

(Hint: Use zero-coupon bond to find the value of v^n. Use the second bond to solve for X/i. Then find the price of the third bond)

Answer rating: 100% (QA)

To solve for P well follow these steps 1 Use the zerocoupon bond formula to find the value of vn whe... View the full answer