Q7. If the required rate of return is 12%, what is the value of a zero coupon bond with a face value of $1,000 that matures in 20 years? Assume an annual compounding period.

A)   $175.30.

B)   $103.67.

C)   $99.33.

Q8. A zero-coupon bond matures three years from today, has a par value of $1,000 and a yield to maturity of 8.5% (assuming semi-annual compounding). What is the current value of this issue?

A)   $78.29.

B)   $782.91.

C)   $779.01.

Q9. A 15-year, $1,000 face value zero-coupon bond is priced to yield a return of 8.00% compounded semi-annually. What is the price of the bond, and how much interest will the bond pay over its life, respectively?

Bond Price             Interest

A)   $308.32                                 $691.68

B)   $691.68                                 $308.32

C)   $389.75                                 $610.25

Q10. A zero-coupon bond has a yield to maturity of 9.6% (annual basis) and a par value of $1,000. If the bond matures in 10 years, today's price of the bond would be:

A)   $422.41.

B)   $391.54.

C)   $399.85.

Q11. A 12-year, $1,000 face value zero-coupon bond is priced to yield a return of 7.50% compounded semi-annually. What is the bond’s price?

A)   $250.00

B)   $419.85.

C)   $413.32.

Q12. Janet Preen is considering buying a 10-year zero-coupon bond that has a $1,000 face value and is priced to yield 7.25% (semi-annual compounding). What price will Janet pay for the bond?

A)   $490.58.

B)   $496.62.

C)   $1,000.00.

Q13. A 15-year zero coupon bond that has a par value of $1,000 and a required return of 8% would be priced at what value assuming annual compounding periods:

A)   $315.

B)   $464.

C)   $308.

Q7. If the required rate of return is 12%, what is the value of a zero coupon bond with a face value of $1,000 that matures in 20 years? Assume an annual compounding period. fficeffice" />

A)   $175.30.

B)   $103.67.

C)   $99.33.

Correct answer is B)
I = 12
PMT = 0
FV = 1,000
N = 20
PV = ?
PV = 103.67

Q8. A zero-coupon bond matures three years from today, has a par value of $1,000 and a yield to maturity of 8.5% (assuming semi-annual compounding). What is the current value of this issue?

A)   $78.29.

B)   $782.91.

C)   $779.01.

Correct answer is C)

The value of the bond is computed as follows:

Bond Value = $1,000 / 1.0425⁶ = $779.01.
N = 6; I/Y = 4.25; PMT = 0; FV = 1,000; CPT → PV = 779.01.

Q9. A 15-year, $1,000 face value zero-coupon bond is priced to yield a return of 8.00% compounded semi-annually. What is the price of the bond, and how much interest will the bond pay over its life, respectively?

Bond Price             Interest

A)   $308.32                                 $691.68

B)   $691.68                                 $308.32

C)   $389.75                                 $610.25

Correct answer is A)

Using an equation: Price_zerocoupon = Face Value × [ 1 / ( 1 + i/n)^{n × 2} ]
Here, Price_zerocoupon = 1000 × [ 1 / (1+ 0.080/2)^{15 × 2}] = 1000 × 0.30832 = 308.32. So, interest = Face – Price = 1000 – 308.32 = 691.68.
Using the calculator: N = (15 × 2) = 30, I/Y = 8.00 / 2 = 4.00, FV = 1000, PMT = 0. PV = -308.32. Again, Face – Price = 1000 – 308.32 = 691.68.

Q10. A zero-coupon bond has a yield to maturity of 9.6% (annual basis) and a par value of $1,000. If the bond matures in 10 years, today's price of the bond would be:

A)   $422.41.

B)   $391.54.

C)   $399.85.

Correct answer is C)        

I = 9.6; FV = 1,000; N = 10; PMT = 0; CPT → PV = 399.85

Q11. A 12-year, $1,000 face value zero-coupon bond is priced to yield a return of 7.50% compounded semi-annually. What is the bond’s price?

A)   $250.00

B)   $419.85.

C)   $413.32.

Correct answer is C)        

Using an equation: Price_zerocoupon = Face Value × [ 1 / ( 1 + i/n)^{n × 2}] Here, Price_zerocoupon = 1000 × [ 1 / (1+ 0.075/2)^{12 × 2}] = 1000 × 0.41332 = 413.32.
Using the calculator: N = (12 × 2) = 24, I/Y = 7.50 / 2 = 3.75, FV = 1000, PMT = 0. PV = -413.32

Q12. Janet Preen is considering buying a 10-year zero-coupon bond that has a $1,000 face value and is priced to yield 7.25% (semi-annual compounding). What price will Janet pay for the bond?

A)   $490.58.

B)   $496.62.

C)   $1,000.00.

Correct answer is A)

N = 10 × 2 = 20; I/Y = 7.25/2 = 3.625; PMT = 0; FV = 1,000; Compute PV = 490.58 or $1,000/(1.03625)²⁰ = $490.58.

Q13. A 15-year zero coupon bond that has a par value of $1,000 and a required return of 8% would be priced at what value assuming annual compounding periods:

A)   $315.

B)   $464.

C)   $308.

Correct answer is A)
N = 15 FV = 1,000
I = 8
PMT = 0
PV = ?
PV = 315.24

zero

thanks

xx