Question: Consider a zero-coupon bond with a yield to maturity (YTM) of 4%, a face value of $1000, and a maturity date 5 years from today.

Consider a zero-coupon bond with a yield to maturity (YTM) of 4%, a face value of $1000, and a maturity date 5 years from today.

a. What are you willing to pay for this bond today?

b. What will you be willing to pay for this bond 3 years from today?

c. What are current yield and capital gains yield for this bond each year?

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a The price of a zerocoupon bond can be calculated using the formula Price Face Value 1 YTMnumber of ... View full answer

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