If immediately upon issue interest rates increased to 13, Finance Basics

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If immediately upon issue interest rates increased to 13

Question: A 20-year, $1,000 par value, zero-coupon rate bond is to be issued to yield 11 percent.

a. What should be the initial price of the bond? (Take the present value of $1,000 for 20 years at 11 percent, using Appendix B.)

b. If immediately upon issue, interest rates dropped to 9 percent, what would be the value of the zero-coupon rate bond?

c. If immediately upon issue, interest rates increased to 13 percent, what would be the value of the zero-coupon rate bond?

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Finance Basics: If immediately upon issue interest rates increased to 13

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