Zeta Corporation has issued a €1,000 face value zero-coupon bond.Which of the following values is closest to the correct price for the bond if the appropriate discount rate is 4% and the bond
Matures in 8 years?

Question

Quizplus · Accepted Answer

The price of a zero-coupon bond can be calculated using the following formula:

Price = Face Value / (1 + r)^n

where r is the discount rate and n is the time until maturity in years.

In this case, the face value is €1,000, the discount rate is 4%, and the time until maturity is 8 years. Plugging into the formula:

Price = €1,000 / (1 + 0.04)^8
Price = €730.69

Therefore, the closest value to the correct price for the bond is €730.69.

Zeta Corporation Has Issued a €1,000 Face Value Zero-Coupon Bond