Question

Abc co issues a zero coupon bond with 5 years to maturity. investor's required rate of return is 3.25%, what is the price of the zero coupon bond issued?

Answer 1

Based on the number of years till maturity and the required rate of return, the price of the zero-coupon bond is $852.22.

what price is the zero coupon bond selling at?

When a bond's par value is not given, assume it is $1,000.

the price of a zero coupon bond is:

= par value / (1 + rate) ^ number of years till maturity

solving gives:

= 1,000 / (1 + 3.25%)⁵

= 1,000 / 1.17341139582939453125

= $852.22

find out more on zero coupon bonds at brainly.com/question/23821872.

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