4. The Shamrock Corporation has just issued a $1,000 par value zero-coupon bond with an 8 percent yield to maturity, due to mature 15 years from today. (Assume semiannual compounding.) a. What is the market price of the bond? b. If interest rates remain constant, what will be the price of the bond in three years? c. If interest rates rise to 10 percent, what will be the price of the bond in three years?

EBK CONTEMPORARY FINANCIAL MANAGEMENT
14th Edition
ISBN:9781337514835
Author:MOYER
Publisher:MOYER
Chapter6: Fixed-income Securities: Characteristics And Valuation
Section: Chapter Questions
Problem 16P
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4. The Shamrock Corporation has just issued a $1,000 par value zero-coupon bond with an
8 percent yield to maturity, due to mature 15 years from today. (Assume semiannual
compounding.)
a. What is the market price of the bond?
b. If interest rates remain constant, what will be the price of the bond in three years?
c. If interest rates rise to 10 percent, what will be the price of the bond in three years?
Transcribed Image Text:4. The Shamrock Corporation has just issued a $1,000 par value zero-coupon bond with an 8 percent yield to maturity, due to mature 15 years from today. (Assume semiannual compounding.) a. What is the market price of the bond? b. If interest rates remain constant, what will be the price of the bond in three years? c. If interest rates rise to 10 percent, what will be the price of the bond in three years?
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