2. A zero-coupon bond has a par value of $1,000 and matures in 20 years. Investors require a 10% annual return on these bonds. For what price should the bond sell? (Note: Zero-coupon bonds do not pay interest. Review Chapter 3.) -3. Consider the two bonds described below: Bond A Bond B 15 20 Maturity (years) Coupon rate (%) (paid semiannually) Par value 10 6 $1,000 $1,000 a. If both bonds had a required return of 8%, what would the bonds' prices be? b. Describe what it means if a bond sells at a dis- count, a premium, and at its face amount (par value). Are these two bonds selling at a discount, premium, or par?
c. If the required return on the two bonds rose to 10%, what would the bonds' prices be?