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The Canadian government anticipates making the following pension payments (in billions):
End of Year Payment
2013 150
2014 160
2015 170
On 12/31/2011, the Canadian government purchases zero coupon bonds from the US government to match exactly the pension payments it anticipates making. The cost of the purchase is 436.106 billion. The price of the zero coupon bonds per 1,000 on 12/31/2011 is as follows:
Term Price :
1 972.76
2 942.60
3 874.82
4 841.97
Calculate X.

Answer :

adioabiola

The value of x which is price per bond which is calculated is 912.

The answer has been attached in detail

How to find the price per bond of x

  • Required no. of coupon for each given amount = (Amount required × 10^9) ÷ 1,000

  • Amount in billion = (Required no. of coupon × given price) ÷ 10^9

Balance = Total - Available

= 290.11 - 436.11

= 146

Price per bond, x = (Balance × 10^9) ÷ Required no. of coupon

= (146 × 10^9) / 160,000,000

= 912.48

Approximately,

Price per bond = 912

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