Zeta Corporation has issued a $1,000 face value zero-coupon bond.Which of the following values is closest to the correct price for the bond if the appropriate discount rate is 4% and the bond matures in 8 years?
A)$730.69
B)$968.00
C)$1,000.00
D)$1,032.00
E)This problem cannot be worked without the annual interest payments provided

Question

Quizplus · Accepted Answer

The price of a zero-coupon bond is calculated using the formula: Price = Face Value / (1 + r)^n, where r is the discount rate and n is the number of years to maturity. For this bond, Price = $1,000 / (1 + 0.04)^8 = $730.69.

Zeta Corporation Has Issued a $1,000 Face Value Zero-Coupon Bond