What is the price of a 3-year zero-coupon bond with a par value of $1,000? Solution

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Suppose that all investors expect that interest rates for the 4 years will be as follows:

Year: 0, 1, 2, 3

Forward Interest Rate:
4.04%
5.01%
6.00%
7.01%

What is the price of a 3-year zero-coupon bond with a par value of $1,000?

_____

Suppose that all investors expect that interest rates for the 4 years will be as follows:
Year Forward Interest Rate
0
(today)3%
1
4%
2
5%
3
6%
What is the price of 3-year zero-coupon bond with a par value of $1,000?

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