As we know zero-coupon bonds are issued without any, Ask an Expert

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As we know, zero-coupon bonds are issued without any periodic coupon payments. The investor gets the interest and the principal on a maturity date. The interest is the difference between the purchase price and the maturity value. The price of this bond is computed as follows:

V₀ = M/(1 + r)ⁿ .... Eq. (4)

Where,

V₀ = Value of the bond

M = Maturity value

r = Expected rate of return

n = Period of the bond.

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M9506957

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