What is the market value of a zero coupon bond with a face value of $1,000 and 20 years to maturity, assuming an annual discount rate of 7%?
A)$100.00
B)$258.42
C)$502.57
D)$1,000.00
E)None of the above

Question

Quizplus · Accepted Answer

The market value of a zero coupon bond can be calculated using the formula: PV = FV/(1+r)^n, where PV is the present value or market value, FV is the face value, r is the annual discount rate, and n is the number of years to maturity. Plugging in the given values, we get: PV = 1000/(1+0.07)^20 = $258.42. Therefore, the correct answer is B.

What Is the Market Value of a Zero Coupon Bond