Question: A zero-coupon bond can be redeemed in 20 years for $10,000. How much should you be willing to pay for it now if you want

A zero-coupon bond can be redeemed in 20 years for $10,000. How much should you be willing to pay for it now if you want a return of:

(a) 10% compounded monthly?

(b) 10% compounded continuously?

Problem involves zero-coupon bonds. A zero-coupon bond is a bond that is sold now at a discount and will pay its face value at the time when it matures; no interest payments are made.

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