A ten-year $1,000,000-face-value zero-coupon Treasury bond has a market price of __________ when the interest rate is 9.62%.

Question

Quizplus · Accepted Answer

The formula for calculating the market price of a zero-coupon bond is:

Market Price = Face Value / (1 + r)^n

where r is the interest rate and n is the number of periods until the bond matures.

In this case, n = 10 years and the face value is $1,000,000.

So, Market Price = $1,000,000 / (1 + 0.0962)^10 
= $1,000,000 / 2.367 
= $399,119

Therefore, the correct answer is A) $399,119.

A Ten-Year $1,000,000-Face-Value Zero-Coupon Treasury Bond Has a Market Price