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You own a zero-coupon bond of Amazon. It matures in 4 years, has a face (par) value of $1,000. An investor is interested in b
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Answer #1

The price or value of zero coupon bonds

Bond price P = M / (1+i) ^n

Where,

Price of the bond P =?

Face value or Maturity value of the bond M = $1,000

i = yield to maturity or priced to yield =11% per year

And time period for maturity n = 4 year

Therefore

P = $1,000 / (1+11%) ^4

P = $658.73

Price the investors are willing to pay for this zero coupon bond is $658.73

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