When pricing a zero-coupon bond,the convention is to use the semiannual pricing formula rather than the annual pricing formula.

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Quizplus · Accepted Answer

This is because zero-coupon bonds do not pay periodic interest, so their price is based on the present value of their future maturity value, compounded semiannually using the semiannual discount rate. Therefore, the semiannual pricing formula is more suitable for zero-coupon bonds.

When Pricing a Zero-Coupon Bond,the Convention Is to Use the Semiannual