Calculate the price of a zero coupon bond that matures in 10 years if the market interest rate is 6 percent. (Assume semi-annual compounding and $1,000 par value.)

Price of coupon is $553.7098

Explanation:

Using the formula

Price = Face value / (1+rate) ^periods

Face value = $1,000

Rate for semiannual = 6/2 = 3

Periods for semiannual = 10*2 = 20

Therefore

Price = 1,000 / (1+0.03) ^20

Price = 1,000 / (1.03) ^20

Price 1000/1.806 = 553.7098