A 10-year, $1,000 par value zero-coupon rate bond is to be issued to yield 7 percent. Calculate your final answer using the formula and financial calculator methods.
Required:
a. What should be the initial price of the bond?
b. If immediately upon issue, interest rates dropped to 6 percent, what would be the value of the zero-coupon rate bond?
c. If immediately upon issue, interest rates increased to 10 percent, what would be the value of the zero-coupon rate bond?
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