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Front Eno.
Zero Coupon Bond
A zero coupon bond is a bond that is sold now at a discount and will pay its face value when it matures. No interest payments are made.
Use this information for the questions below.
Question 1
Coursology
50 pts
Use the Zero Coupon Bond information above to answer this question.
You buy a zero coupon bond with a face value of \( \$ 12,000 \) that matures in 11 years for \( \$ 10,000 \). What is your annual compound rate of return?
\( \qquad \) \%. Round to the nearest thousandths of a percent (3 decimal places).
\( \square \)
Question 2
Coursology
50 pts
Use the Zero Coupon Bond information above to answer this question.
A zero coupon bond with a face value of \( \$ 20,000 \) matures in 26 years. What should the bond be sold for now if its rate of return is to be \( 4.071 \% \) compounded annually?
\$ \( \qquad \) Round to the nearest dollar.
Desk 1