Bill wants to buy five-year zero coupon bonds with a face value of $1,000.His opportunity cost is 8.5 percent.Assuming annual compounding,what would be the current market price of these bonds? (Round to the nearest dollar.)

Question

Quizplus · Accepted Answer

The current market price of a zero coupon bond is calculated using the formula: Price = Face Value / (1 + r)^n, where r is the interest rate and n is the number of years. Here, Price = $1,000 / (1 + 0.085)^5 = $665.05, rounded to $665.

Bill Wants to Buy Five-Year Zero Coupon Bonds with a Face