Fill This Form To Receive Instant Help

Help in Homework
trustpilot ratings
google ratings


Homework answers / question archive / Calculate the price of a zero coupon bond that matures in 10 years if the market interest rate is 6 percent

Calculate the price of a zero coupon bond that matures in 10 years if the market interest rate is 6 percent

Finance

Calculate the price of a zero coupon bond that matures in 10 years if the market interest rate is 6 percent. (Assume semi-annual compounding and $1,000 par value.) A) $553.68 B) $558.66 C) $940.00 D) $1,000.00 
 

pur-new-sol

Purchase A New Answer

Custom new solution created by our subject matter experts

GET A QUOTE

Answer Preview

Answer

A )

Explanation

Computation of Price of a Zero Coupon Bond using PV Function in Excel:

=-pv(rate,nper,pmt,fv)

Here,

PV = Price of Zero Coupon Bond = ?

Rate = 6%/2 = 3% 

Nper = 10 years * 2 = 20 Periods 

PMT = 0

FV = $1,000

Substituting the values in formula:

=-pv(3%,20,0,1000)

PV or Price of Bond = $553.68

 

So, Price of zero coupon bond is $553.68 If you have any doubt you can ask me through comment box.

Related Questions