What is the present value of a 10 year, pure discount bond that pays
$1,000 at maturity and is priced to yield the following rates?
a.  5 percent
b.  10 percent
c.  15 percent

Lola5 ?

A zero-coupon bond like this sells at the present value (PV) of $1000
after 10 years.  Present values are calculated by dividing the
compounded interest.  Thus after one year at 5% interest it is:
Value / (1.05)

After two years:
Value / (1.05)* (1.05) which can also be expressed as Value / (1.05)^2

After 10 years:
Value / (1.05)^10 , where the ^ represents the power or exponent

You can figure it on a calculator easily enough.  But an Excel
spreadsheet can show you the present value of all 3 interest rates at
any point in the 10-year cycle.  I?ve posted one here and it should be
easily readable in your browser, even if you don?t have the Microsoft
spreadsheet:

PV of $1000 in 10 years
http://www.mooneyevents.com/pv1000.xls

So, the correct amounts are:
A.	$1000 / (1.05)^10 = $613.91

B.	$1000 / (1.10)^10 = $385.54

C.	$1000/ (1.15)^10 = $247.18


Google search strategy:
?present value? + ?zero coupon? bond

Best regards,

Omnivorous-GA