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You find a zero coupon bond with a par value of $10,000 and 13 years to maturity. If the yield to maturity on this bond is 4.9 percent, what is the dollar price of the bond

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abiolataiwo2015

Answer:

$18,763.38

Explanation:

Calculation to determine the dollar price of the bond

Using this formula

Value of bond=Par value/(1+YTM/2)^(2*time period)

Let plug in the formula

Value of bond=10,000/(1+0.049/2)^(2*13)

Value of bond=10,000/(1.0245)^26

Value of bond=10,000/1.8763378

Value of bond=$18,763.38(Approx).

Therefore the dollar price of the bond is $18,763.38

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