Calculate the Price of a Zero-Coupon Bond That Matures in Five

question 63

Multiple Choice

Calculate the price of a zero-coupon bond that matures in five years if the market interest rate is 7.50 percent. (Assume semiannual compounding and $1,000 par value.)

• A)$692.02
• B)$696.57
• C)$962.50
• D)$1,000.00

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Definitions:

Bonds

Debt securities issued by corporations or governments to raise funds, promising to pay back the face value on maturity along with periodic interest payments.

Treynor's Measure

A performance metric for determining how well a portfolio has performed in excess of a risk-free rate, adjusted for the portfolio's risk.

Residual Standard Deviation

A measure of the amount of variance in a dataset or predictive model not explained by the model itself.

Beta

A measure of a stock's volatility in relation to the overall market; a beta above 1 is more volatile than the market.