A 10-year zero-coupon bond that yields 5% is issued with a $1,000 par value. What is the issuance price of the bond? Round to the nearest dollar.
A)$614
B)$64
C)$6,140
D)None of these options

Question

Quizplus · Accepted Answer

The issuance price of a zero-coupon bond is calculated using the formula: Price = Par Value / (1 + Yield)^Years. Here, Price = $1,000 / (1 + 0.05)^10 = $613.91, which rounds to $614.

A 10-Year Zero-Coupon Bond That Yields 5% Is Issued with a $1,000