A zero-coupon bond is a bond that is sold for less than its face value (that is, it isdiscounted) and has no periodic interest payments. Instead, the bond isredeemed for its face value at maturity. Thus, in this sense, interest is paid atmaturity. Suppose that a zero-coupon bond sells for $8,500 and can beredeemed in 20-years for its face value of $38,000. What is the annualcompound rate of return?Annual compound rate =% (Round to two decimal places as needed.)

Given that, Starting value = $ 8500 Ending value = $ 38000 Time period = 20 years Calculation…

Answered: A zero-coupon bond is a bond that is…

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter16: The Markets For Labor, Capital, And Land

Section: Chapter Questions

Problem 12P

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A corporate bond returns 12 percent of its cost (in present value terms) in the first year, 11 percent in the second year, 10 percent in the third year, and the remainder in the fourth year. What is the bond's duration in years? Please show all the steps including the equation.
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Today, you invest P100,000 into a fund that pays 25% interest compounded annually. Three years later you borrow P50,000 from a bank at 20% annual interest and invest the fund. Two years later, you withdraw enough money from the fund to repay the bank loan and all interest due on it. Three years from this withdrawal, you start taking P20,000 per year out of funds. After five withdrawals, you withdraw the balance in the fund. How much was withdrawn? Kindly provide a CLEAR and COMPLETE answer.
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What is the percentage change in price for a zero coupon bond if the yield changes from 6.5% to 5.5%? The bond has a face value of$1,000 and it matures in 10 years. Use the price determined from the first yield, 6.5%, as the base in the percentage calculation
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