Flashstream Productions Inc.is issuing a zero-coupon bond that will have a maturity of fifty years.The bond's par value is $1,000,and the current yield on similar bonds is 7.5%.What is the expected price of this bond,using the semiannual convention?

Question

Quizplus · Accepted Answer

The price of a zero-coupon bond is calculated using the formula: Price = Par Value / (1 + yield/2)^(2*n), where n is the number of years to maturity. For a 50-year bond with a 7.5% yield, the price is $1,000 / (1 + 0.075/2)^(2*50) = $25.19.