Zero-coupon bond has no interest payments

Assignment Help Financial Management

Reference no: EM131998159

A zero-coupon bond has no interest payments. Investors buy the bonds for less than face value, and they receive the face value of the bond at the end of the bond’s life. A 30-year, zero-coupon bond that has a face value of $1,000 therefore is a promise to pay the investor $1,000 at the end of 30 years. If investors have a discount rate of 6%, what would they be willing to pay for this bond? What would they be willing to pay if their discount rate was 5% or 7%?

Reference no: EM131998159

Questions Cloud

Sale or purchase of any security at the market price : If the capital markets are efficient, then the sale or purchase of any security at the market price is:

Describing the procedures for each compliance plan : Your assignment is to write two 1 page sections in a Word document describing the procedures for each compliance plan. Remember to support your procedures.

Assets as expenses in particular accounting period : Which one of the following is not a recognized method of recognizing assets as expenses in a particular accounting period?

What is this observation consistent with : You have observed that every time Toronto Skaters’ Corp. stock falls by 2% in one week, it rises by 8% the next week. What is this observation consistent with?

Zero-coupon bond has no interest payments : A zero-coupon bond has no interest payments. What would they be willing to pay if their discount rate was 5% or 7%?

Create a consolidated job description : Use this information to create a consolidated job description. Be sure to include requirements such as Education, Professional Experience, and Responsibilities.

Discount all of these payments using investor discount rate : Discount all of these payments using the investor’s discount rate, and sum to get the NPV of the bond to each investor.

Discuss the various levels of public administration : Analyze how public leadership influences the various levels of public administration and public service. Examine the personal aspects of public leadership.

Miller industrial tools has two separate divisions : Miller Industrial Tools has two separate divisions. Division X produces custom work on a pre-paid basis only for long-term customers and therefore,

User Account

All Pages