The value of a 20 year zero-coupon bond when the market required rate of return of 9% (semiannual)is ____.
A)€171.93
B)€178.43
C)€318.38
D)€414.64
E)None of the above.

Question

Quizplus · Accepted Answer

The value of a zero-coupon bond is calculated using the formula: $ P = \frac{F}{(1 + r/n)^{nt}} $, where $ F $ is the face value (assumed to be €1000), $ r $ is the annual interest rate (0.09), $ n $ is the number of compounding periods per year (2 for semiannual), and $ t $ is the number of years (20). Plugging in these values gives approximately €171.93.

The Value of a 20 Year Zero-Coupon Bond When the Market