A zero-coupon bond has a yield to maturity of 5% and a par value of $1,000. If the bond matures in 16 years, it should sell for a price of ________ today.

A) $458.11
B) $641.11
C) $789.11
D) $1,100.11

Zero-Coupon Bond

A type of debt security that does not pay interest (coupon) but is traded at a deep discount, rendering profit at maturity when the bond is redeemed for its full face value.

Yield To Maturity

The total return anticipated on a bond if it is held until it matures, including all interest payments and the repayment of principal.

Par Value

The nominal or face value of a bond, share of stock, or other financial instrument, as stated by the issuer.