I got this example to calculate the value of a zero-coupon bond. It is solved. However, my question is about The difference between the purchase price, and par value is the investor’s interest earned on the bond. Is it a gain or loss of $57.5? And should I consider purchasing the bond? The value of a zero-coupon bond with a face value of $1,000, YTM of 3%, and 2 years to maturity would be $1,000 / (1.03)2, or $942.59 Since it's below the par value, it's considered a "discount bond," but my confusion is whether to buy the bond or not. Therefore, any help to master this topic will be much appreciated.
I got this example to calculate the value of a zero-coupon bond. It is solved. However, my question is about The difference between the purchase price, and par value is the investor’s interest earned on the bond. Is it a gain or loss of $57.5? And should I consider purchasing the bond? The value of a zero-coupon bond with a face value of $1,000, YTM of 3%, and 2 years to maturity would be $1,000 / (1.03)2, or $942.59 Since it's below the par value, it's considered a "discount bond," but my confusion is whether to buy the bond or not. Therefore, any help to master this topic will be much appreciated.
Financial Management: Theory & Practice
16th Edition
ISBN:9781337909730
Author:Brigham
Publisher:Brigham
Chapter5: Bonds, Bond Valuation, And Interest Rates
Section: Chapter Questions
Problem 5MC: What would be the value of the bond described in Part d if, just after it had been issued, the...
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I got this example to calculate the value of a zero-coupon bond. It is solved. However, my question is about The difference between the purchase price, and par value is the investor’s interest earned on the bond. Is it a gain or loss of $57.5? And should I consider purchasing the bond?
The value of a zero-coupon bond with a face value of $1,000, YTM of 3%, and 2 years to maturity would be $1,000 / (1.03)2, or $942.59
Since it's below the par value, it's considered a "discount bond," but my confusion is whether to buy the bond or not. Therefore, any help to master this topic will be much appreciated.
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