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The current​ zero-coupon yield curve for​ risk-free bonds is as​ follows: Maturity ​(years) 1 2 3 4 5 YTM 4.98 % 5.54 % 5.78 % 5.91 % 6.03 % What is the price per $ 100 face value of a​ two-year, zero-coupon,​ risk-free bond?

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akindeleot

Answer:

The Current Value of Zero-Coupon Bond $89.78

Explanation:

Face Value = $100

Yield to Maturity = 5.54%

Maturity Years = 2 Years

The Current Value of Zero-Coupon Bond = Present Value of Face Value

= $100 x [PVIF 5.54%, 2 Years]

= $100 / (1 + r)ⁿ

= $100 / (1 + 0.0554)²

= $100 / 1.11387

= $89.78

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