CFA Practice Question

CFA Practice Question

Using semi-annual convention, what is the price of a zero-coupon bond with a face value of $1,000,000, a YTM of 6.32%, and 12 years remaining to maturity?
A. $465,945
B. $475,945
C. $473,945
Explanation: The price of a zero-coupon bond is equal to the present value of the face value received in the future: P = F / (1 + YTM/2)t, where: P = price, F = face value of the zero-coupon bond, YTM = Yield to maturity, and t = periods until maturity. Here, F = $1,000,000, YTM = 0.0632, and t = 24. It follows that: P = $1,000,000 / (1+ [0.0632/2])23 = P = $473,945.

User Contributed Comments 5

User Comment
quincy fv=1000, i=3.16, n=24, pmt=0, pv=473.945
copus make sure you arrive to the exam with a spare set of batteries for your calculator!!!!
moneyguy copus, I would suggest to put a brand new battery in the calculator the day before the exam. Not really much time to pull out a screwdriver and take the calculator apart during the exam.
ashish100 or have two calculators.. you'll be filthy rich after

and can donate them both to someone who needs need it
forry9er I really could not figure out why we were treating this question like a semi-annual bond.. Doh!
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