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(a) What should be the initial price of the bond? Take the present value of $1,
(a) What should be the initial price of the bond? Take the present value of $1,000 to be received after 15 years at 10 percent, using Appendix B at the back of the text.
(b) If immediately upon issue, interest rates dropped to 8 percent, what would be the value of the zero-coupon rate bond?
(c) If immediately upon issue, interest rates increased to 12 percent, what would be the value of the zero-coupon rate bond?
A 15-year $1,000 par value bond Zero-coupon bond values
A 15-year, $1,000 par value zero-coupon rate bond is to be issued to yield 10 percent.
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