A zero coupon bond paying $100 at maturity 10 years from now has a current price of $50.Correct answer is 104.8 percent of par.
Below is the formula for calculating the existing value of a zero coupon bond: Price = M / (1 + r)^n the place M = the date of maturity r = Interest Rate n = # of Years until Maturity If an investor desires to make a 4% return on a bond with $10,000 par fee due to mature in two years
To calculate the yield-to-maturity (YTM) on a zero-coupon bond, first divide the face value (FV) of the bond by the current value (PV). The result is then raised to the electricity of one divided by the number of compounding periods.
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