Autos and More offers a zero coupon bond with a yield to maturity of 11.3 percent.The bond matures in 15 years and has a face value of $1,000.What is this bond worth today? (Assume semiannual compounding. )

Question

Quizplus · Accepted Answer

Zero coupon bonds generally use semiannual compounding to be consistent with coupon bonds.Bond value = $1,000/[1 + (.113/2)]^{15 × 2} = $192.27

Autos and More Offers a Zero Coupon Bond with a Yield