Question

A zero-coupon bond is a security that pays no interest, and is therefore bought at a substantial discount from its face value. If the interest rate is 5% with annual compounding how much would you pay today for a zero-coupon bond with a face value of $1,900 that matures in 8 years?

Answer 1

Answer:

Purchasers of zero coupon bonds earn interest by the bond being sold at a discount to its par value. A coupon-bearing bond pays coupons each period, and a coupon plus principal at maturity. The price of a bond comprises all these payments discounted at the yield to maturity.

Hope it will help yu