You bought a $10-$year zero$-$coupon bond with a face value of $$1,000$ and a yield to maturity of $3\mathrm{.}3\%($EAR$).$ You keep the bond for $5$ years before selling it$.$

Attempt $1/3$ for $10$ pts$.$

Part$1$

What was the price of the bond when you bought it$?$

Correct $$

The price of a zero$-$coupon bond is just the present value of its face value, discounted by the approprate interest rate for the remaining time to maturity.

P$0=$F$(1+$r$)$t$=1,0001\mathrm{.}03310=722\mathrm{.}76$P$0=$F$(1+$r$)$t$=1,0001\mathrm{.}03310=722\mathrm{.}76$

Using a financial calculator:

$$NI$/$YPVPMTFVInputs$103\mathrm{.}30-1,000$Compute$722\mathrm{.}76$

Attempt $1/3$ for $10$ pts$.$

Part$2$

What is the rate of return $($HPR$)$ if$$the yield to maturity is still $3\mathrm{.}3\%$ when you sell the bond?

Submit

Attempt $1/3$ for $10$ pts$.$

Part$3$

What is the rate of return $($HPR$)$ if$$the yield to maturity is $4\mathrm{.}4\%$ when you sell the bond?

Submit

Attempt $1/3$ for $10$ pts$.$

Part$4$

What is the rate of return $($HPR$)$ if$$the yield to maturity is $1\mathrm{.}1\%$ when you sell the bond?