Question

50 POINTS!!!!Arthur buys a zero coupon bond with a face value of $5,000 for $4,000. The bond has five years until it matures. How much would Arthur earn if he holds this bond to maturity?

$2,000
$1,000
$6,000
$7,000

Answer 1

$6000 is correct this is easy

Answer 2

A zero coupon bond is a type of bond that is sold below its face value but pays no interest. At maturity, Arthur will be able to have $5,000 but he paid $4,000 for it. Therefore, he was able to earn $1,000 ($5,000 - $4,000) from the bond.