Question

What is the value of zero-coupon bond with a par value of $1,000 and a yield to maturity of 5.20%? The bond has 12 years to maturity.

Answer 1

$544.265

Step-by-step explanation:

Given:

FV = $1,000

Yield to maturity = 5.2%

N = 12 years

Required:

Find the value of the zero coupon bond.

Use the formula:

PV = FV * PVIF(I/Y, N)

Thus,

PV = 1000 * PVIF(5.2%, 12)

= 1000 * 0.544265

= $544.265

The value of the zero coupon bond is $544.3