An FI Manager Purchases a Zero-Coupon Bond That Has Two

question 74

Multiple Choice

An FI manager purchases a zero-coupon bond that has two years to maturity.The manager paid $76.95 per $100 for the bond.The current yield on a one-year bond of equal risk is 12 percent,and the one-year rate in one year is expected to be either 16.65 percent or 15.35 percent.Either rate is equally probable.

Given the expected one-year rates in one year,what are the possible bond prices in one year?

• A)$85.22 and $86.25.
• B)$85.73 and $86.69.
• C)$85.22 and $86.69.
• D)$85.73 and $86.25.

---

Definitions:

More Time

A request or need for additional time to complete or perform a task, suggesting current allotments are insufficient.

Resources

Assets, materials, or other sources of support and assistance available to be used in achieving goals or completing projects.

Effective Channels

Mediums or pathways that are proficiently used to convey messages or information to the intended audience.

No Immediate Feedback

A situation where responses or reactions to a message or action are not provided instantly, often leading to delays in communication or adjustment.