Diane Carter is interested in buying a five-year zero coupon bond with a face value of $1,000. She understands that the market interest rate for similar investments is 7.76 percent. Assume annual coupon payments. What is the current value of this bond?
Zero coupon bond is a debt instrument that is sold for less than its face value, does not make any interest payments to the bondholder, and can be redeemed for its face value at maturity. In this sense, it does pay interest. It’s just at the end of the investment instead of periodically throughout its life
therefore, 1000/(1+7.76%)^5
Zero coupon bond value = $688.20
Diane Carter is interested in buying a five-year zero coupon bond with a face value of...
Diane Carter is interested in buying a five-year zero coupon bond with a face value of $1,000. She understands that the market interest rate for similar investments is 9 percent. Assume annual coupon payments. What is the current value of this bond?
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