A municipality is planning to issue a 5-year zero-coupon bond. The face value is $1,000 and the yield-to-maturity is 5.6%. What is the price of this muni-bond? Round to the nearest cent. Do not include a dollar sign in your answer. (i.e. If your answer is $432.51, then type 432.51 without $ sign)

Price of bonds= 761.51

Explanation:

We know that zero-coupon bonds does not give coupon payment to investor,the return to investor is difference between price and face value of bond is given.

Formula: P= F/(1+r)∧T

where P= Price of bonds=?

      r=yield to maturity=5.6%=0.056

          T=5; No of periods, as in this it is not given semi annually, we will take r annually.

          P= 1000/(1+.056)∧5

         P= 1000/1.31316

        P= 761.

Please refer to the attached.

Before Jane Brown wrote the check, her account was $55 at First National Bank which is reflected by the checkable deposit of $55 which the bank will keep in reserve as an asset.

Joe Green has not received the money so his account at Second National will show $0 balances.

After the cheque has been written and deposited, Jane Brown's chekcable deposits at First national will become $0 as well as the reserves.

Joe Green on the other hand, having gained the $55 and deposited it will see his checkable deposits rise to $55 which the bank will keep in reserve as an asset.