Question

The current zero-coupon yield curve for risk-free bonds is as follows:. . What is the price per $100 face value of a four-year, zero-coupon, risk-free bond? The price per $100 face value of the four-year, zero-coupon, risk-free bond is $ (Round to the nearest cent.)

Answer 1

The price per $100 face value of a four-year, zero-coupon, risk-free bond can be calculated using the present value formula.

Step-by-step explanation:

The current zero-coupon yield curve for risk-free bonds indicates the prevailing interest rates for different maturities. In this case, we are looking for the price per $100 face value of a four-year, zero-coupon, risk-free bond. To calculate the price, we can use the present value formula: Price = Face Value / (1 + Yield/100)^Years. Using the provided yield curve, we can find the yield for the four-year maturity and calculate the price per $100 face value.

Let's assume the yield for the four-year maturity is 9%. Plugging the values into the formula, we have: Price = 100 / (1 + 9/100)^4 = 100 / 1.09^4 ≈ $74.74. Therefore, the price per $100 face value of a four-year, zero-coupon, risk-free bond is approximately $74.74.