A 10-year zero-coupon bond that yields 5% is issued with a $1000 par value. What is the issuance price of the bond (round to the nearest dollar)?
A) $614
B) $64
C) $6,140
D) None of these

Question

Quizplus · Accepted Answer

The issuance price of a zero-coupon bond is calculated using the formula: Price = Par Value / (1 + Yield)^Years. Here, Price = $1000 / (1 + 0.05)^10 = $613.91, which rounds to $614.

A 10-Year Zero-Coupon Bond That Yields 5% Is Issued with a $1000