What is the price today (in dollars and cents) of a 10-year zero coupon bond if the required rate of return is 3.75%. The bond face value is $1000.Place your answer in dollars and cents.You should set your calculator for at least four decimal places of accuracy. I'll remind you of this from time to time but this is a working rule throughout the semestmesterDo not include a dollar sign or comma in your answer. This is another rule that I'll remind you of but should be a working rule throughout the semester.CHECK ANSWER

Time = t = 10 YearsRequired Rate of Return = r = 3.75%Face Value = fv = $1000

Answered: What is the price today (in dollars and…

What is the price today (in dollars and cents) of a 10-year zero coupon bond if the required rate of return is 3.75%. The bond face value is $1000.

Personal Finance

13th Edition

ISBN:9781337669214

Author:GARMAN

Publisher:GARMAN

Chapter14: Investing In Stocks And Bonds

Section: Chapter Questions

Problem 7DTM

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Concept explainers

Bond Valuation

Bond valuation are the notes issued by the corporation to raise long-term funds for the business. The corporations are required to pay the interest on such liabilities at a specified rate of interest (termed as coupon rate) at specified dates which may be on semi-annual or annual basis. These interest payments may be in the form of coupons.

Question

What is the price today (in dollars and cents) of a 10-year zero coupon bond if the required rate of return is 3.75%. The bond face value is $1000.
Place your answer in dollars and cents.
You should set your calculator for at least four decimal places of accuracy. I'll remind you of this from time to time but this is a working rule throughout the semest
mester
Do not include a dollar sign or comma in your answer. This is another rule that I'll remind you of but should be a working rule throughout the semester.
CHECK ANSWER

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Yield to Maturity and Yield to Call Arnot International’s bonds have a current market price of $1,200. The bonds have an 11% annual coupon payment, a $1,000 face value, and 10 years left until maturity. The bonds may be called in 5 years at 109% of face value (call price = $1,090). What is the yield to maturity? What is the yield to call if they are called in 5 years? Which yield might investors expect to earn on these bonds, and why? The bond’s indenture indicates that the call provision gives the firm the right to call them at the end of each year beginning in Year 5. In Year 5, they may be called at 109% of face value, but in each of the next 4 years the call percentage will decline by 1 percentage point. Thus, in Year 6 they may be called at 108% of face value, in Year 7 they may be called at 107% of face value, and so on. If the yield curve is horizontal and interest rates remain at their current level, when is the latest that investors might expect the firm to call the bonds?