If a 15yr, $1000 US zero coupon bond is priced yield 10%. What is the market price A 231.38 B 23.50 C 239.39 I chose C but qbank say A they calculate add follows N=30, I/Y=5, PMT=0, FV=1000; CPT→PV=231.38 my question is why is N =30 and not 15
30 semiannual periods.
Why should we assume that it is semi annual period and not annually or quarterly
Because the convention for bonds is that yields are measured as BEY – bond equivalent yield – which is twice the semiannual (effective) yield.
Q: What interest rate do zero-coupon bonds pay?
A: Zero percent.
Q: How often do they pay zero percent coupons?
A: Twice a year.
Ok thanks