The value of a 20 year zero-coupon bond when the market required rate of return is 9% (semiannual) is ____.

Question

Quizplus · Accepted Answer

A zero-coupon bond pays no interest and is sold at a discount to its face value. The value of the bond is calculated using the formula: Present Value = Face Value / (1 + r/n)^(nt), where r is the annual interest rate, n is the number of compounding periods per year, and t is the number of years. Assuming a face value of $1000, the calculation is: $1000 / (1 + 0.09/2)^(2*20) = $171.93.

The Value of a 20 Year Zero-Coupon Bond When the Market