Calculate the Price of a Zero-Coupon Bond That Matures in Five

question 55

Multiple Choice

Calculate the price of a zero-coupon bond that matures in five years if the market interest rate is 7.50 percent. (Assume semiannual compounding and $1,000 par value.)

• A) $692.04
• B) $696.57
• C) $962.50
• D) $1,000.00

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Definitions:

Future Events

Events that have not yet occurred but are expected to happen and can affect financial outcomes or business operations.

Liquidation Preference

A term used in financial structuring, determining the order in which shareholders are paid in the event of a company’s liquidation.

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Probable Loss

A potential financial loss that is likely to occur in the future, often reflected in financial statements as a provision.