Emmett 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 formula:
Price = Face Value / (1 + r)n
where r is the discount rate and n is the number of years until maturity.
Using this formula, we get:
Price = 1000 / (1 + 0.04)8
Price = 644.61
Therefore, the closest value to the correct price is A) $644.61.

Emmett Corporation Has Issued a $1,000 Face Value Zero-Coupon Bond