From the following information compute the zero-rate for 1.5-years.Face value$100Coupon semi-annuallyCurrent priceYears to maturity0.$94$890.5$1001.0$100$4$94.841.5(A) 11.50%(B) 12.38%(C) 11.65%(D) 6.11%

In order to compute the zero-rate of bond for 1.5 years, we need to first compute the returns on 6…

From the following information compute the zero-rate for 1.5-years. Face value $100 $100 $100 Coupon semi-annually Current price Years to maturity 0.5 1.0 $94 $89 $94.84 $4 1.5 (A) 11.50% (B) 12.38% (C) 11.65% (D) 6.11%

From the following information compute the zero-rate for 1.5-years. Face value $100 $100 $100 Coupon semi-annually Current price Years to maturity 0.5 1.0 $94 $89 $94.84 $4 1.5 (A) 11.50% (B) 12.38% (C) 11.65% (D) 6.11%

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter5: The Time Value Of Money

Section: Chapter Questions

Problem 7P

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Concept explainers

Present Value

Present value (PV) is defined as the current or present value of all future sums of cash flow or money at a specified rate of return. This rate of return is known as the discounted rate, which is essentially the interest rate, discounted over some time. The expected cash flows are discounted at a discount rate to compute the present value. The higher the discount rate, the higher the future value (FV), but the lower the present value.

Question

From the following information compute the zero-rate for 1.5-years.
Face value
$100
Coupon semi-annually
Current price
Years to maturity
0.
$94
$89
0.5
$100
1.0
$100
$4
$94.84
1.5
(A) 11.50%
(B) 12.38%
(C) 11.65%
(D) 6.11%

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