Final answer:
The yield on a Zero-Coupon bond is not comparable to the yield on a semi-annual coupon bond. Zero-Coupon bond yield is calculated based on the difference between the purchase price and the face value, while the yield on a semi-annual coupon bond includes interest payments received throughout the bond's term.
Step-by-step explanation:
The yield on a Zero-Coupon bond is not comparable to the yield on a semi-annual coupon bond with the same nominal interest rate. The yield on a Zero-Coupon bond is calculated based on the difference between the purchase price and the face value, whereas the yield on a semi-annual coupon bond takes into account the interest payments received throughout the bond's term.
For example, let's say you have a Zero-Coupon bond with a face value of $1,000 and a purchase price of $800. The yield would be calculated as ($1,000 - $800) / $800 = 25%. On the other hand, if you have a semi-annual coupon bond with the same nominal interest rate, you would receive regular interest payments throughout the bond's term in addition to the face value at maturity. The yield calculation would take into account these interest payments.
Therefore, the yield on a Zero-Coupon bond is higher than the yield on a semi-annual coupon bond with the same nominal interest rate.