Azero-coupon bond is a security that pays no interest, and is therefore bought at a substantial discount from its face value. if the interest rate is 9% with annual compounding how much would you pay today for a zero-coupon bond with a face value of $1,700 that matures in 4 years?

so  pay today is $1186.05

Explanation:

Given data

face value = $1,700

rate = 9%

time = 4 year

to find out

how much would you pay today

solution

we know present value formula that is

present value = face value ×

put all value here rt = 0.09(4) = 0.36

present value = face value ×

present value = 1700 ×

present value = 1186.049

so  pay today is $1186.05

We would pay $1186.05  today for a zero-coupon bond with a face value of $1,700 that matures in 4 years.

Explanation:    

To calculate present value use the formula;  

present value = face value ×  

present value  

present value

And, the pay for today is $1186.05

To learn more, refer:

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match each type of restriction with one of its effects.

a. land-use laws

b. labor laws

c. banking regulations

a. controlled development of towns and cities

b. protection of young workers

c. greater financial stability