ies. Maturity (years) Zero-Coupon YTM 1 2 3 4 5 5.80% 5.50% 5.20% 5.00% 4.80% A) Calculate the price today of a 3-year zero-coupon bond with a face value of € B) Calculate the price today of a 2-year default-free bond with a face value of € an annual coupon rate of 6%.

ies. Maturity (years) Zero-Coupon YTM 1 2 3 4 5 5.80% 5.50% 5.20% 5.00% 4.80% A) Calculate the price today of a 3-year zero-coupon bond with a face value of € B) Calculate the price today of a 2-year default-free bond with a face value of € an annual coupon rate of 6%.

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter4: Bond Valuation

Section: Chapter Questions

Problem 14P: Current Yield with Semiannual Payments A bond that matures in 7 years sells for $1,020. The bond has...

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Concept explainers

Treasury Market

On-the-run securities are the most recently issued securities in the market depth and are therefore traded at some premium. The off-the-run securities are the ones issued just before the most recent ones. The on-the-run securities have a lower yield to the investor than the off-the-run securities.

Question

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Consider the following zero-coupon yields on default-free securities:
Maturity (years)
1
2
3
4
5
Zero-Coupon YTM
5.80%
5.50%
5.20%
5.00%
4.80%
A) Calculate the price today of a 3-year zero-coupon bond with a face value of €1000.
B) Calculate the price today of a 2-year default-free bond with a face value of €1000 and
an annual coupon rate of 6%.
C) Calculate the yield-to-maturity of the bond in Question 2B.

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