What is the value of a 20-year,zero-coupon bond with a face value of $1,000 when the market required rate of return is 9.6 percent,compounded semiannually?

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Quizplus · Accepted Answer

The value of a zero-coupon bond can be calculated using the present value formula: $PV = \frac{FV}{(1 + r)^n}$, where PV is the present value (price) of the bond, FV is the face value, r is the semiannual interest rate, and n is the total number of compounding periods. Given a face value (FV) of $1,000, an annual interest rate of 9.6% (or 0.096), which when divided by 2 gives a semiannual rate of 0.048, and a term of 20 years (which equals 40 semiannual periods), the calculation is as follows: $PV = \frac{1,000}{(1 + 0.048)^{40}}$, resulting in approximately $153.30.

What Is the Value of a 20-Year,zero-Coupon Bond with a Face