What should the purchase price of a 2-year zero coupon bond be if it is purchased at the beginning of year 2 and has face value of $1,000?

Question

Quizplus · Accepted Answer

The correct answer is A. The purchase price of a 2-year zero coupon bond purchased at the beginning of year 2 is $877.54. This is because the bond has a face value of $1,000 and will mature in one year. The present value of $1,000 in one year is $877.54, so this is the price that should be paid for the bond.

What Should the Purchase Price of a 2-Year Zero Coupon