Chapter 8: What is the value of a 20-year, zero-coupon bond with a face value of...

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Chapter 8: What is the value of a 20-year, zero-coupon bond with a face value of $1,000 when the market required rate of retu

Answer 1

Answer #1

Period in Years	20
FV (Face Value)	1000
RR (Requird rate of Return)	11.60%
Frequency	Semi-annual

Breaking Details into Semi Annual
SP (Semi-Annual Period) (Year*2)	40
SRR (Semi-Annual RR) (Annual/2)	5.80%

Formula	FV/(1+SRR)^SP
Answer	104.8511727

Since Bond is compounded semi-annually I have multiplied the years by 2 because total number of periods is 40 likewise I divided the return by 2.

So answer is 1st one i.e 104.85

Answer 2

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