Calculate the price of a zero-coupon bond that matures in 20 years if the market interest rate is 8.5 percent. (Assume annual compounding and a par value of $1,000.)
A) $90.29
B) $195.62
C) $1,195.62
D) $995.62

Question

Quizplus · Accepted Answer

The price of a zero-coupon bond is calculated using the formula: Price = Par Value / (1 + r)^n, where r is the market interest rate and n is the number of years to maturity. For this bond, Price = $1,000 / (1 + 0.085)^20 = $195.62.

Calculate the Price of a Zero-Coupon Bond That Matures in 20