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Sydney bought a ZERO-COUPON BOND that has a par value of $1,000 and matures in 10...

Sydney bought a ZERO-COUPON BOND that has a par value of $1,000 and matures in 10 years. The bond is priced to yield an 8 percent return. What price did Sydney pay for the bond and how much interest will she earn over its life?

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Answer #1

Sydney will pay for bond = $1000/(1+0.08)10

= $1000/2.15892499727

= $ 463.19

Interest = $1000-$463.19

=$ 536.81

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