You find a zero coupon bond with a par value of 10000 and 28

You find a zero coupon bond with a par value of $10,000 and 28 years to maturity. The yield to maturity on this bond is 5.4 percent. Assume semiannual compounding periods. What is the price of the bond? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Price

Solution

Par Value = $10,000

Annual YTM = 5.40%
Semiannual YTM = 2.70%

Time to Maturity = 28 years
Semiannual Period to Maturity = 56

Price of Bond = $10,000 * PVIF(2.70%, 56)
Price of Bond = $10,000 / 1.027^56
Price of Bond = $2,249.34