At what price will Gohm have to sell a 10-year zero coupon bond that will yield 8.75% if held to maturity?

Question

Quizplus · Accepted Answer

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

P = F / (1 + r)^n

Where:
P = price of the bond
F = face value of the bond
r = yield rate
n = number of years to maturity

Plugging in the given values, we get:

P = F / (1 + r)^n
P = 1000 / (1 + 0.0875)^10
P = 1000 / 2.697
P = $370.46

Therefore, Gohm will have to sell the 10-year zero coupon bond for $370.46. None of the given options match this answer, but the closest option is D ($432.00).

At What Price Will Gohm Have to Sell a 10-Year