Consider a zero-coupon bond with a $1000 face value and ten years left until maturity.If the YTM of this bond is 10.4%,then the price of this bond is closest to:
A)$1000
B)$602
C)$1040
D)$372
E)$906

Question

Quizplus · Accepted Answer

The price of a zero-coupon bond can be calculated using the formula:
Price = Face Value / (1 + YTM)^n

Where n is the number of years left until maturity.

Plugging in the values given in the question:
Price = 1000 / (1 + 0.104)^10
Price = 1000 / 2.5937
Price = 385.48

The closest option to this price is D, $372.

Consider a Zero-Coupon Bond with a $1000 Face Value and Ten