CHAPTER 5

The price of a pure discount (zero coupon) bond is the present value of the par. Even though the bond makes no coupon payments, the present value is found using semiannual compounding periods, consistent with coupon bonds. This is a bond pricing convention. So, the price of the bond for each YTM is: a. P = $1,000/(1 + .025)20 = $610.27. b. ................
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