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! |