A Zero Coupon Bond Is a Bond That Pays No

A zero coupon bond is a bond that pays no return until it comes due and then pays the holder of the bond its face value.Suppose that a $4,000 zero coupon bond will come due on January 1, 2020.If the interest rate is 5% and will remain 5% forever, what will this bond be worth on January 1, 2005?

A) $4,000/0.05
B) $4,000/0.05¹⁵
C) $4,000 + 4,000/15
D) $4,000 + 1.05¹⁵
E) None of the above.

Correct Answer:

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