Question: suppose a zero-coupon bonds pays $1000 in 10 years. assuming annual compounding.

Get the Best Analysis to this Case Study written by MBA/CFA writers.

**Order Now by just sending an email at assignment@writerkingdom.com . Send us case study file and questions which you want to get covered in case solution. Click Here to see how it works

Compare

Description

Question:

suppose a zero-coupon bonds pays $1000 in 10 years. assuming annual compounding. what is the rate of return is the bond costs $301.00 today?

Answer:

Suppose rate of return on bond = r

$1,000 = $301 × (1 + r) ^ 10

(1 + r) ^ 10 = $1,000 / $301

(1 + r) ^ 10 = 3.3222

(1 + r) = 3.3222 ^ (1 / 10)

(1 + r) = 1.1276

r = 1.1276 – 1

= 12.76%

Rate of return on zero coupon bond is 12.76%.

Reviews

There are no reviews yet.

Be the first to review “Question: suppose a zero-coupon bonds pays $1000 in 10 years. assuming annual compounding.”

Your email address will not be published. Required fields are marked *