Question

A zero-coupon bond has a face value of $21,000 and a maturity of 8 years. Similar bonds have an interest rate of 5% per year. What is the price of this bond

Answer 1

Zero-cupon bond= $14,213.63

Step-by-step explanation:

Giving the following information:

A zero-coupon bond has a face value of $21,000 and a maturity of 8 years. Similar bonds have an interest rate of 5% per year.

To calculate the price of the bond, we need to use the following formula:

Zero-cupon bond= [face value/(1+i)^n]

Zero-cupon bond= [21,000 / (1.05^8)]

Zero-cupon bond= $14,213.63