--%>

Problem on zero bond price

You are provided a bond which will pay no interest however will return the par value of $1,000 20 years from now. When your needed return for this bond is 7.35%, what are you willing to reimburse or pay?

E

Expert

Verified

Zero-coupon bond price = F (1 + i)-n = $1,000 (1 + .0735)-20 = $1,000(.2420800635) = $242.08

   Related Questions in Microeconomics

  • Q : Purely competitive market and constant

    When this firm is typical in illustrated figure of this purely competitive market and when this is a constant-cost industry, in that case the long run supply curve for the industry is a horizontal line which would go from: (1) point c

  • Q : Drive rivals out of business A firm may

    A firm may temporarily lower prices as well as earn negative profits in trying to: (w) drive rivals out of business. (x) find rivals to lower prices. (y) maximize current profit. (z) A rational firm would not do this.

    Q : Emerging natural monopoly A monopoly

    A monopoly will come out naturally when: (w) the government relaxes antitrust laws. (x) economies of scale are large relative to market demand. (y) variable costs are huge relative to fixed costs. (z) variable costs rise as output expands.

  • Q : Define the term privatization What do

    What do you mean by the term privatization?

  • Q : Equilibrium market price In a perfectly

    In a perfectly competitive market, market demand curve is provided by Qd = 200 − 5Pd, and the market supply curve is provided by Qd = 35Ps. a) Determine the equilibrium market price

  • Q : Problem on Horizontal Integration I

    I have a problem in economics on Horizontal Integration. Please help me in the following question. McDonalds makes hamburgers at a number of various locations. This is an illustration of a: (i) Horizontally integrated firm. (ii) Monopoly. (iii) Vertic

  • Q : Market demand curve Market demand curve

    Market demand curve: The market demand also rises with a fall in price and vice-versa. In figure below the quantity demanded by

  • Q : Common type of competition in

    The most common type of competition among firms in monopolistic competition is: (1) price competition. (2) product differentiation. (3) collusion. (4) predatory pricing. (5) cutthroat competition. I need a good ans

  • Q : Economoic the setting of a price

    the setting of a price ceiling below the equililbrium level will

  • Q : Features of oligopoly Features of

    Features of oligopoly: Following are some principal features of oligopoly : A) A few firmsB) High degree of interdependence.C) Non-price competition.D) Entry barriers.E) Formation of cartels