RC Inc. just issued zero-coupon bonds with a par value of $1,000. If the bond has a maturity of 15 years and a yield to maturity of 10%, what is the current price of the bond if it is priced in the conventional manner?
A) $1,000
B) $239.39
C) $231.38
D) This question cannot be answered because the coupon payment information is missing.
Answer: C
Explanation: C) The conventional way to price a zero-coupon bond is to discount the par value assuming semiannual compounding. Zero-coupon Bond Price = = = $231.38.
MODE = END, P/Y = 2, C/Y = 2
INPUT 30 10 ? 0 -1,000
KEY N I/Y PV PMT FV
CPT 231.38
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