Final answer:
The purchase price of a 4-year zero-coupon bond can be calculated using the present value formula. Assuming an interest rate of 8%, the purchase price would be $735.03.
Step-by-step explanation:
The purchase price of a 4-year zero-coupon bond can be calculated using the present value formula. Since the bond does not pay any interest, the purchase price will be the discounted value of the bond's face value. Assuming an interest rate of 8%, we can use the formula:
Purchase Price = Face Value / (1 + r)^n
where r is the interest rate and n is the number of years. Plugging in the values, the purchase price would be:
Purchase Price = 1000 / (1 + 0.08)^4
Simplifying the equation, the purchase price of the bond would be $735.03.