Asked by
Brianna Prieto
on Oct 19, 2024
Verified
Assuming semiannual compounding, a 20-year zero coupon bond with a par value of $1,000 and a required return of 12% would be priced at ________.
A) $97.22
B) $104.49
C) $364.08
D) $732.14
Zero Coupon Bond
A bond that is issued at a discount to its face value and pays no interest but is redeemed at its face value at maturity.
Required Return
Required return is the minimum expected yield by investors to compensate for the risk of an investment.
Semiannual Compounding
Interest calculation method where interest is added to the principal sum of a loan or deposit twice a year.
- Acquire knowledge on the pricing strategies and yield determination for different categories of bonds, namely zero-coupon, discount, and callable bonds.
Verified Answer
PK
Learning Objectives
- Acquire knowledge on the pricing strategies and yield determination for different categories of bonds, namely zero-coupon, discount, and callable bonds.