A company has issued a $10,000 bond with zero coupon. It has 20 years remaining to its original 30-year maturity and the market is seeking a yield of 8%. The price of the bond today is:

Question

Quizplus · Accepted Answer

The price of a zero-coupon bond is calculated using the formula: Price = Face Value / (1 + yield)^n. Here, Face Value = $10,000, yield = 8% or 0.08, and n = 20 years. So, Price = $10,000 / (1 + 0.08)^20 = $2,145.

A Company Has Issued a $10,000 Bond with Zero Coupon