Question of the Week
The correct answer is d.
The value of a zero coupon bond is the present value of the lump-sum principal payment. There is no semi-annual coupon payments, only the principal repayment (of $1500) at maturity. Therefore the yield of the zero coupon bond equals the PV of the par value. In this question, the beginning value of the bond would be 1500 / (1.10^20) = $222.97.