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A 10-year 1000 par value zero-coupon rate bond is to be


A 10-year, $1,000 par value zero-coupon rate bond is to be issued to yield 7 percent.

a. What should be the initial price of the bond?

b. If immediately upon issue, interest rates dropped to 6 percent, what would be the value of the zero-coupon rate bond?

c. If immediately upon issue, interest rates increased to 9 percent, what would be the value of the zero-coupon rate bond?

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Financial Management: A 10-year 1000 par value zero-coupon rate bond is to be
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