A 17-year, $1,000 par value zero-coupon rate bond is to be issued to yield 7 percent. Use Appendix B for an approximate answer but calculate your final answer using the formula and financial calculator methods.
a. What should be the initial price of the bond? Bond Price:
b. If immediately upon issue, interest rates dropped to 6 percent, what would be the value of the zero-coupon rate bond? (Assume annual compounding. Do not round intermediate calculations and round your answer to 2 decimal places.)
c. If immediately upon issue, interest rates increased to 9 percent, what would be the value of the zero-coupon rate bond? (Assume annual compounding. Do not round intermediate calculations and round your answer to 2 decimal places.)