Today, you want to sell a zero-coupon bond you currently own. The bond matures in 9 years. How much will you receive for your bond if the market yield to maturity is currently 8.88%? Ignore any accrued interest.

Question

Quizplus · Accepted Answer

The price of a zero-coupon bond can be calculated using the formula: Price = Maturity Value / (1 + yield to maturity)^n, where n is the number of years until maturity. Assuming a maturity value of $1,000 (as is standard for most bonds unless otherwise specified), the calculation would be: Price = $1,000 / (1 + 0.0888)^9 ≈ $465.02.

Today, You Want to Sell a Zero-Coupon Bond You Currently