Answer:
$3,606.49
Explanation:
the price of a zero coupon bond = maturity value / (1 + i)ⁿ
- maturity value = $10,000
- i = 6.09% / 2 = 3.045% semiannual interest rate
- n = 17 years x 2 semiannual compounding = 34 periods
the price of a zero coupon bond = $10,000 / (1 + 3.045%)³⁴ = $10,000 / 1.03045³⁴ = $10,000 / 2.772779928 = $3,606.49
the formula we used to determine the market price of a zero coupon bond is basically the present value
