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. My Answer: 1000/(1.12)^10 = 321.97 I know this is simple but it’s bothering me. Not sure what I am doing wrong
unless stated otherwise, zero-coupon bonds are calculated on a semi-annual basis
Judging by that the answer is A?
Gotcha, 1000/(1.06)^20. A is correct.
watch out though, there are questions where they sneak in the fact that it’s quoted on an annual basis…