A zero-coupon bond with a par value of 1000 matures in 10, Financial Management

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A zero-coupon bond with a par value of 1000 matures in 10

Valuing a Zero-Coupon Bond

a. A zero-coupon bond with a par value of $1,000 matures in 10 years. At what price would this bond provide a yield to maturity that matches the current market rate of 8 percent?

b. What happens to the price of this bond if interest rates fall to 6 percent?

c. Given the above changes in the price of the bond and the interest rate, calculate the bond price elasticity.

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Financial Management: A zero-coupon bond with a par value of 1000 matures in 10

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Financial Management: A zero-coupon bond with a par value of 1000 matures in 10

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