This problem has a correct solution. I'm trying to do it myself but I'm getting 391.65 instead of 1065.28. Why? What am I doing wrong?

What is the difference in the values of a zero coupon bond that has 11 years to maturity and a 6\% APR coupon bond that has 8 years to maturity? Use $1000 par, 5\% YTM and semiannual analysis for both. Expert Answer 100% (6 ratings) This solution was written by a subject matter expert. It's designed to help students like you learn core concepts. Anonymous answered this 462 answers The price of a bond is the sum of present value of future cash flows. Value of zero coupon bond P0=(1+25%)221000 Since semi-annual analysis is used the yield becomes half of the annual yield. The number of time periods become 22 as there are 2 time periods per year and the zero coupon bond is 11 year. The only cash flow that takes place is the face value at end of the maturity. P0=$580.86 Price of the coupon bond Per period coupon is 6%/2 i.e. 3% since the annual coupon is 6% and semi-annual analysis means a 3\% coupon The value of the bond is P=(1+25%)30+(1+25%)230++(1+25%)1630+1000 Solving the equation the price of the bond is $1065.28 The difference in price of the bonds is =PP0=1065.28580.86=$484.41 Was this answer helpful? Most Used Actions P=(1+20.05)30+(1+20.05)230++(1+20.05)1630+1000 Equations Examples " Solution P=(1+20.05)30+(1+20.05)230++(1+20.05)1630+1000: Steps