CFA Practice Question

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CFA Practice Question

A zero-coupon bond requires a 5% rate of return and has four years remaining to maturity. What should this bond sell for?
A. $82.08
B. $82.27
C. $90.60
Explanation: N=8, I/Y=2.5, PMT=0, FV=100, PV=?=82.08

User Contributed Comments 4

User Comment
Yuyan assume a semi-annual interest payment of 0.
ruvardha can anyone explain it to me hw to compute it through calculator BA11(Ti) . exams are getting close and i am going mad . please help ...
zoro Zero coupon bonds are always semi-annual (thats a principle), then you can work it out....
dlukas With the calc, it's even easier than a coupon bond. N = 8 (since we assume semiannual); I/Y = 2.5 (again, semiannual), and FV = 100. CPT PV and you get your current price.

You also should read your calculator's manual to learn about the CF worksheet. Very convenient for unequal cash flows. Also the depreciation worksheet will save you several minutes in an exam.
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