CFA Practice Question

There are 490 practice questions for this study session.

CFA Practice Question

What is the value of a zero-coupon bond that has six years to maturity and an applicable interest rate of 9%?
A. $58.97
B. $59.63
C. $76.79
Explanation: N=12, I/Y=4.5, PMT=0, FV=100, PV=?=58.97

User Contributed Comments 5

User Comment
DLUCFA How are we supposed to know that this is problem assumes semiannual discounting?
wtff that's true for every bond. assume semiannual compounding if not mentioned....
Joel1980 Seems a little odd you compound semiannually on a zero coupon bond...
Joel1980 I take that back... makes perfect sense! :-)

The use of six-month period is required in order to have uniformity between the present value calculation of the maturity value for a coupon bond that pays semi-annually and a zero-coupon bond.
toine_1234 Periodic bond yields for both straight and zero-coupon bonds are conventionally computed based on semi-annual periods, as US bonds usually make two coupons payments per year (see notes from Reading 6 / Subject 5)
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