Answer:
The correct answer to the following question is $430.241
Step-by-step explanation:
Zero coupon bond which are also know as pure discount bond, are those bonds which are issued at discount and makes no periodic interest payments to the bearer.
Given information -
Face value at maturity - $1000
Yield to maturity - 8.8%
Number of years till maturity - $10
Current market price - maturity value / (1+ i) ^n
where i = yield to maturity, n = Number of years till maturity
= $1000 / (1+8.8%)^10
= $1000 / (1.088)^10
= $1000 / 2.32428
= $ 430.2407
= $430.241 ( approximately )