A discount bond is also called a <u>zero coupon bond</u> because the owner does not receive periodic payments.
A discount bond is a bond that is issued for much less than its par—or face—fee. discount bonds can also be a bond currently trading for less than its face cost inside the secondary market. A bond is considered a deep-cut price bond if it's far bought at a substantially decrease price than the par fee, normally at 20% or more.
A zero-coupon bond is a bond that pays no interest and trades at a reduction to its face price. It is also known as a natural cut price bond or deep cut price bond. U.S. Treasury payments are an example of a 0-coupon bond.
Coupons are the promised hobby payments of a bond, paid periodically till the adulthood date of the bond. The coupon rate determines the quantity of every coupon fee of a bond. The coupon rate, expressed as an APR, is about by using the issuer and said on the bond certificate.
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Answer:
$ 3,085
Explanation:
Given that;
The present value(PV) ------ ???
Future payment (F) ---- $5,000
The annual effective rate are 4%, 5% and 5.5% respectively, which can be illustrated as;
r = 0.04, 0.05 and 0.055 respectively.
The present value formula is given as:


PV = 5000 × (1.04)⁻³(1.05)⁻²(1.055)⁻⁵
= $ 3,084.814759
≅ $ 3,085
I believe the answer is b. However I'm not quite sure. I think b would be the most reasonable answer.
The answer & explanation for this question is given in the attachment below.
A prospectus is given to potential investors.