Azero-coupon bond is a security that pays no interest, and is therefore bought at a substantial discount from its face value. if stated interest rates are 4% annually (with quarterly compounding) how much would you pay today for a zero-coupon bond with a face value of $2,700 that matures in 6 years?

You pay today for a $2124.7

Step-by-step explanation:

Consider the provided information,

Interest rates are 4% annually with a face value of $2,700 that matures in 6 years.

Total number of months = n = 6 × 12 = 72

Interest is 4% annually which can be written as:

i = 0.04/12 = 0.00333...

FV is $2700.

Now, use the formula:

Substitute the respective value in above formula.

On solving the above equation, we get the value of PV is:

Hence, you pay today for a $2124.7