1. A risk-free bond will pay you $1000 in 2 years and nothing in between. The annual discount rate is i=67.5% compounded annually. What is the bond’s present value?
PV of Zero Coupon Bond:
= Maturity Value * PVF (r%, n)
Where r is discount rate and n is time period.
Assuming Int Rate is 6.75% ( here given as 67.5% it is looking little odd..)
= $ 1000 * PVF (6.75%, 2 )
= $ 1000 * 0.8775
= $ 877.53
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If Int Rate is 67.5% ( COnsidering same Int provided in question)
= $ 1000 * PVF (67.5%, 2 )
= $ 1000 * 0.3564
= $ 356.4
Pls comment, if any further assistance is required
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