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NEW QUESTION: 1
Given that the risk-free rate of return is 6%, what is the value of a riskless zero-coupon bond with which the principal payment is $10,000 in 15 years?
A. $6,841
B. $7,126
C. $5,929
D. Not enough information
E. $4,173
F. $5,733
Answer: E
Explanation:
Explanation/Reference:
Explanation:
The value of a zero-coupon bond is equal to the present value of its principal payment. The required rate of return on a riskless bond is the risk-free rate of return. Usingappendix C in the book by Reilly & Brown, the present value of the bond is $10,000 x0.4173 = $4,173, or $10,000/(1.06