Question

What is the value of a zero-coupon bond with a yield to maturity of 9 percent, a par value of $1,000, and 10 years to maturity? (Assume semi-annual compounding)

Answer 1

$414.64

Step-by-step explanation:

For computing the value of zero-coupon bond we need to apply the present value formula i.e to be shown in the attachment

Given that,

Future value = $1,000

Rate of interest = 9% ÷ 2 = 4.5%

NPER = 10 years × 2 = 20 years

PMT = $0

The formula is shown below:

= -PV(Rate;NPER;PMT;FV;type)

So, after applying the above formula, the present value is $414.64