Homework Question help Needed

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A zero coupon bond has a face value of $1,000 and matures in 4 years. Investors require a (n) 6.1% annual return on these bonds. What should be the selling price of the bond? (Round to the nearest cent)

Jul 1st, 2015

Thank you for the opportunity to help you with your question!

The price of a zero coupon bond can be calculated using the formula

PB = Fmn/(1 +i/m)mn 

The interest is paid annually thus mn would be 4*1=4

The selling price, PB would be

$1000/ (1+(0.061/4)^4

=$941.3

Please let me know if you need any clarification. I'm always happy to answer your questions.
Jul 1st, 2015

States that this answer is incorrect

Jul 1st, 2015

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