Consider two zero coupon bonds in which you receive $100 at the maturity date, one maturing in 3 years and one maturing in 5 years. Both are currently priced to yield 6 percent. Calculate the current market value of each bond. Now suppose the yield to maturity rises to 9 percent. Calculate the percent change in the price of each bond as the yield went from 6 to 9.

Intermediate Financial Management (MindTap Course List)
13th Edition
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Eugene F. Brigham, Phillip R. Daves
Chapter4: Bond Valuation
Section: Chapter Questions
Problem 12P: Bond Yields and Rates of Return A 10-year, 12% semiannual coupon bond with a par value of 1,000 may...
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2c.  

c. Consider two zero coupon bonds in which you receive $100 at the maturity date, one

maturing in 3 years and one maturing in 5 years. Both are currently priced to yield 6

percent. Calculate the current market value of each bond. Now suppose the yield to

maturity rises to 9 percent. Calculate the percent change in the price of each bond as the yield went from 6 to 9.

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Price of Zero coupon bond “A” with maturity 3 years and yield 6% can be determined as below:

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