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27 June, 10:39

General Electric Incorporated issued a 30 year zero-coupon bond. If comparable AA rated bonds yield 7.8%, what is the price of bond? (Discount at an annual rate) (a) $1,000.00 (b) $ 0.00 (c) $1,050.60 (d) $ 105.06 (e) $ 780.00

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  1. 27 June, 11:18
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    d. $105.06

    Explanation:

    Data provided as per the question is below

    Bonds yield = 7.8%

    Time period = 30 years

    The computation of price of bond is shown below:-

    Present value factor 7.8% for 30 years * Face value

    = 0.10506 * 1,000

    = $105.06

    Therefore for computing the price of bonds we simply multiply the present value factor with face value.
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