Final answer:
To calculate the price of a zero-coupon bond that matures in 14 years with semiannual compounding, use the present value formula. The price of the bond is approximately $441.41.
Step-by-step explanation:
To calculate the price of a zero-coupon bond that matures in 14 years with semiannual compounding, we can use the present value formula. The formula is: PV = FV / (1 + r/n)^(n*t) where PV is the present value, FV is the future value or face value of the bond, r is the interest rate, n is the number of compounding periods per year, and t is the number of years until maturity.
In this case, the bond has a face value of $1,000, a maturity period of 14 years, and a market interest rate of 5.60 percent. Since the bond is a zero-coupon bond, there are no periodic interest payments. Plugging these values into the formula, we get:
PV = 1000 / (1 + 0.056/2)^(2*14)
After evaluating the expression, the price of the bond is approximately $441.41.