Answer:
Present value of zero coupon bond = $283
Explanation:
Provided that zero coupon bonds are to be issued.
In zero coupon bonds issue price is less than face value to meet the needs.
Interest rate = 13%
Duration = 10 years, Paid semiannually.
Thus periods = 20
Interest rate = [tex]13 \times \frac{6}{12} = 6.5[/tex]
Therefore, Present value factor @6.5% for 20 periods = 0.283
Therefore, Value of bond today = $1,000 [tex]\times[/tex] 0.283 = $283
