How much would an investor lose the first year if she purchased a 30-year zero-coupon bond with a $1,000 par value and a 10% yield to maturity,only to see market interest rates increase to 12% one year later?
A) $19.93
B) $20.00
C) $23.93
D) $25.66

Question

Quizplus · Accepted Answer

Price = $1,000 / 1.10³⁰ = $57.31New price = $1,000 / 1.12²⁹ = $37.38Loss = $57.31 − 37.38 = $19.93

How Much Would an Investor Lose the First Year If