I'm doing research for a paper and I can't seem to figure out how to calculate this. I have a bond pricing model that works for a normal bond but I can't seem to calculate a correct value for a zero coupon with a very long maturity.
The bond is 40,000 Par, matures 12/15/2095. Current bond price is 54.725. I'm trying to calculate what the difference in value will be given a change in fed funds rate from 5.25% to 5% or 4.75%.
Any help would be greatly appreciated. Thanks.How can I calculate the current value of a zero coupon bond?
The formula for the curent value of a zero coupon bond is simply the present value of the bond at muturity. Some of your details don't make sense, so please recheck. Anyway, the formula is
Zero coupon bond =Future value/(1+interest rate) ^n
This assumes annual compounding.
PS: $42,101 looks good to me for 5.25%.
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