A is correct. I saw the solution using 6 months compounding. But the question does not have anything that mentions if it is annual or 6 months compounding. Am I missing? ------------------ If an investor’s required return is 12 percent, the value of a 10-year maturity zero-coupon bond with a maturity value of $1,000 is closest to: A. $312. B. $688. C. $1,000. D. $1,312.
bonds are always 6 months unless otherwise stated.
you mean t-bonds are all 6 months compounding? or ALL bonds unless stated otherwise? does anyone have a reference for this? Thanks
all bonds unless they say “annual compounding” in the body of the text, is assumed to be semi-annual compounding.
i believe its a bond market convention. According to Wikipedia: http://en.wikipedia.org/wiki/Bond_(finance) “In the U.S., most bonds are semi-annual, which means that they pay a coupon every six months.”
My understanding is that zero coupon bonds are always semi-annual compounding