Suppose that a zero-coupon bond has a face value of $10,000 and 5 years to maturity.If the YTM is 7.2%,at what price will this bond be traded?
A)$7,063.60
B)$6,965.59
C)$9,328.58
D)$7,129.86
E)$10,000

Question

Quizplus · Accepted Answer

The formula to calculate the bond price is:

Bond price = Face value / (1+YTM)n

Where the face value is $10,000, the YTM is 7.2%, and n is the number of years to maturity, which is 5.

Plugging in the values, we get:

Bond price = $10,000 / (1+0.072)5
= $7,063.60

Therefore, the best choice is A) $7,063.60.

Suppose That a Zero-Coupon Bond Has a Face Value of $10,000