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Chapter 5: Q. 65 (page 326)

Zero-Coupon Bonds How much should a $10,000 face value, zero-coupon bond, maturing in 10 years, be sold for now if its rate of return is to be 8% compounded annually?

Short Answer

Expert verified

The zero coupon bonds need to be sold now for $4631.93 to be worth $10,000 in 10 years.

Step by step solution

01

Step 1. Given Information

We have to find how much should a $10,000 face value, zero-coupon bond, maturing in 10 years, be sold for now if its rate of return is to be 8% compounded annually.

A=$10,000t=10r=8%=0.08n=1P=?

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