A zero-coupon bond pays no interest during its lifetime. Upon maturity, the investor receives face value. The purchase price determines the rate of return. (a) Henri paid $10,750 for a $20,000 face value zero-coupon bond that matures in 10 years. Find the annual compound rate of interest received. (Round your answer to two decimal places.) % (b) Sandi plans to purchase a zero-coupon bond with a face value of $10,000 and matures in 7 years. She wants to earn 7.1% compounded annually. Find the price she should pay. (Round your answer to two decimal places.)

A zero-coupon bond pays no interest during its lifetime. Upon maturity, the investor receives face value. The purchase price determines the rate of return. (a) Henri paid $10,750 for a $20,000 face value zero-coupon bond that matures in 10 years. Find the annual compound rate of interest received. (Round your answer to two decimal places.) % (b) Sandi plans to purchase a zero-coupon bond with a face value of $10,000 and matures in 7 years. She wants to earn 7.1% compounded annually. Find the price she should pay. (Round your answer to two decimal places.)

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter5: The Time Value Of Money

Section: Chapter Questions

Problem 11P

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