You are considering the purchase of a 3 year Treasury bond with a face value of...

 

Transcribed Image Text:

You are considering the purchase of a 3 year Treasury bond with a face value of $1000 and zero-coupons. The market interest rate on similar risk and maturity bonds is 5%, compounded semi-annually. What is the highest price that are you willing to pay for the bond? Note: .-Zero-Coupon Bonds make no interest payments (Coupon=0) F (1+r)' Bond Value= (1+r)' F A zero coupon bond with a face value of $1,000 is issued with an initial price of $415.50. The bond matures in 10 years. What is the implicit interest, in dollars, for the first year of the bond's life? Use semiannual compounding. HULLAY You are considering the purchase of a 3 year Treasury bond with a face value of $1000 and zero-coupons. The market interest rate on similar risk and maturity bonds is 5%, compounded semi-annually. What is the highest price that are you willing to pay for the bond? Note: .-Zero-Coupon Bonds make no interest payments (Coupon=0) F (1+r)' Bond Value= (1+r)' F A zero coupon bond with a face value of $1,000 is issued with an initial price of $415.50. The bond matures in 10 years. What is the implicit interest, in dollars, for the first year of the bond's life? Use semiannual compounding. HULLAY

Answer rating: 100% (QA)

To calculate the highest price you are willing to pay for the 3year Treasury bond you can use the fo... View the full answer