Answer :
$1001.161 will be the price of these bonds if the appropriate discount rate is 10 percent.
What does the term interest mean?
The costs associated with borrowing cash and paying somebody to lend you money are referred to as interest. Interest is frequently calculated as such a monthly percentage of the amount borrowed. The interest on the loan is represented by such a percentage.
Briefing:
Discount rate (r) = 10%
Semi-annual compounding
Face value = $1000
Period (t) = 15 years
Price of zero-coupon bond (P) :
Face value / ( 1 + r)^t
r = 10%, compounded semianually
r = (10 / 100) = 0.1 / 2 = 0.05
Period (t) = 15 * 2 = 30
P = 1000 / (1 + 0.05)^30
P = 1000 / 1.005^30
P = 1000 / 1.1614
P = 1001.1614
P = $1001.161 ( 3 decimal places)
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