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Zero Coupon Bonds

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Hi,

 

Please provide some inputs.

 

1) A Zero Coupon Bond with a maturity of 10 years has an annual effective yield of 10%.

 

 

2) Different Discounting Methods

 

 

Consider a bond that pays $100 in 10 years and has present value of $ 55.8395. This corresponds to an annally compounded rate of 6%. This rate can be transformed into a semi-annual compounded rate.

 

 

2   It can be also transformed into a continuously compounded rate = 5.83%

 

3) Another requirement is to  increase the frequency of the compounding, the resulting rate decreases.

 

with regards

raju


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