What is the value of a $1,000 par value zero-coupon bond maturing in 10 years to an investor requiring a 7% rate of return?

Question

Quizplus · Accepted Answer

The formula to calculate the value of a zero-coupon bond is:
Value=FV/(1+r)^n, where FV is the face value of the bond, r is the required rate of return, and n is the number of years until maturity.
Plugging in the given values, we get:
Value=1000/(1+0.07)^10 = $508.35
Therefore, the best choice is B.

What Is the Value of a $1,000 Par Value Zero-Coupon