What is the value of a 20 year zero-coupon bond that has a face value of £1000, given the market required rate of return is 9% (semiannual) is ____.

Question

Quizplus · Accepted Answer

The correct answer is A because the present value of the bond is £171.93. This is calculated using the formula:PV = FV / (1 + r)^nwhere:PV is the present valueFV is the face valuer is the market required rate of returnn is the number of periodsIn this case, the face value is £1000, the market required rate of return is 9% (semiannual), and the number of periods is 40 (20 years * 2 semiannual periods per year). Plugging these values into the formula, we get:PV = £1000 / (1 + 0.09/2)^40PV = £1000 / (1.045)^40PV = £171.93

What Is the Value of a 20 Year Zero-Coupon Bond