Answer:
$274.54
Explanation:
Given:
n = 15 years
Future Value, FV = 1000
rate, r = 9%
Required:
Find the initial price of the bond
Given that we have a zero coupon bond here, it means the par value is paid at date of maturity, and no issuer pays no regular coupon payment.
To find the initial price of the bond, use the formula:
[tex]\frac{FV}{(1+r)^n}[/tex]
Substitute figures:
[tex] \frac{1000}{(1+0.09)^1^5}[/tex]
[tex] = \frac{1000}{(1.09)^1^5}[/tex]
[tex] = \frac{1000}{3.642}[/tex]
[tex] = 274.57 [/tex]
The initial price of the bond should be $274.54
