What is the quote of a 6 year, zero coupon bond with $1000 face value if the yield to maturity is 2

Finance Jan 22, 2021

What is the quote of a 6 year, zero coupon bond with $1000 face value if the yield to maturity is 2.6% (assume semiannual compounding)? Please round your answer to three decimal places.

Expert Solution

Answer:
Face Value (Future Value) = $1,000
Time (n ) = 6 years or 12 semi-annual periods
Rate (r ) = 2.6% p.a. or 1.3% semi-annually
Quote Price (Present Value) = ??

Future Value = Present Value * (1 + r)^ n
$1,000 = Present Value * (1 + 0.013)^ 12
$1,000 = Present Value * (1.013)^ 12
$1,000 = Present Value * 1.16765
Present Value = $856.42

The Quote of 6 year, zero coupon bond is $856.42

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