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There are zero coupon bonds outstanding that have a YTM of 5.97 percent and mature in 19 years. The bonds have a par value of $10,000. If we assume semiannual compounding, what is the price of the bonds

Respuesta :

jepessoa

Answer:

market price = $1,104.20

Explanation:

yield to maturity of zero coupon bonds = (face value / market price)¹/ⁿ - 1

  • YTM = 5.97%
  • n = 19 x 2 = 38
  • face value = $10,000

(face value / market price)¹/ⁿ = YTM + 1

face value / market price = (YTM + 1)ⁿ

market price = face value / (YTM + 1)ⁿ

market price = $10,000 / 1.0597³⁸ = $10,000 / 9.0563 = $1,104.20