Comparing zero coupon bond yields
Since changing the price of a bond affects the yield and the yield represents the return on investment, comparing different prices allows you to calculate the return you can make from different bonds of different prices.
In this exercise, you will compare the same zero coupon bond at different prices to see how it affects its yield. You will work directly with the formula calculated earlier.
Take a 5 year zero coupon bond with a face value of 100, and compare its yield when it has a price of USD 84.67 and USD 98.33.
Recall the formula for zero coupon bond yield is \(PV = \frac{FV}{(1 + r)^n}\).
This exercise is part of the course
Bond Valuation and Analysis in Python
Hands-on interactive exercise
Have a go at this exercise by completing this sample code.
# Find the first zero coupon bond yield
bond_1 = ____
# Print the result
print("ZCB Price USD 84.67: ", ____)