The following is a list of prices for zero-coupon bonds with different maturities and par value of $1,000. You have purchased a 4-year maturity bond with a 9% coupon rate paid annually.The bond has a par value of $1,000.What would the price of the bond be one year from now if the implied forward rates stay the same
A)$995.63
B)$1,108.88
C)$1,000.00
D)$1,042.78

Question

The following is a list of prices for zero-coupon bonds with different maturities and par value of $1,000.  You have purchased a 4-year maturity bond with a 9% coupon rate paid annually.The bond has a par value of $1,000.What would the price of the bond be one year from now if the implied forward rates stay the same
A)$995.63 
B)$1,108.88 
C)$1,000.00 
D)$1,042.78

Quizplus · Accepted Answer

(925.16/711.00)^1/3 - 1.0 = 9.17%; FV = 1000, PMT = 90, n = 3, i = 9.17, PV = $995.63.

The Following Is a List of Prices for Zero-Coupon Bonds