Suppose you purchase a zero coupon bond with a face
value of $1,000, maturing in 20 years, for $212.00. Zero coupons pays the
investor the face value of the maturity date. What is the implicit interest in
the first year of the bonds life?
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zero coupon bond yield=(F/PV)^1/n -1
No explicit interest is paid on
the zero-coupon bond (no coupons)
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