What is the price of a zero coupon 1000 face value bond with

What is the price of a zero coupon (1,000 face value) bond with six years to maturity when the required rate of return is 3%?

$837.48

$747.26

$821.93

$822.70

$839.62

Solution

In case of zero coupon bond, interest is zero.

Calculation of Price:

Face value= $1000

time(n)= 6 years

return= 3%

Price of bond= Face value/(1+return)^6

                  =1000/(1+0.03)^6= 1000/1.194052

                   = 837.48

So correct answer is $837.48