a If a zero coupon bond with a face value of $1,000 payable in 1 year sells for $925, what is the interest rate b If another bond with the same face value and maturity sells for $900, what is the interest rate on this bond c Which bond, the one discussed in question a or question b, would you rathe...

a 81 b 111 c Its tempting to say that it would be preferable to invest in the second bond since it ...

a. If a zero-coupon bond with a face value of $1,000 payable in 1 year sells for

Question:

a. If a zero-coupon bond with a of $1,000 payable in 1 year sells for $925, what is the interest rate?
b. If another bond with the same and sells for $900, what is the interest rate on this bond?
c. Which bond, the one discussed in question a or question b, would you rather invest in? Are you sure? Think again!
Face Value
Face value is a financial term used to describe the nominal or dollar value of a security, as stated by its issuer. For stocks, the face value is the original cost of the stock, as listed on the certificate. For bonds, it is the amount paid to the... Maturity
Maturity is the date on which the life of a transaction or financial instrument ends, after which it must either be renewed, or it will cease to exist. The term is commonly used for deposits, foreign exchange spot, and forward transactions, interest...