Allan purchased a zero coupon bond four years ago. He paid $3,000 and it has a face value of $3,500. How much money did he earn for holding the bond until maturity

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matmonreal matmonreal

27-02-2018
Mathematics

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Allan purchased a zero coupon bond four years ago. He paid $3,000 and it has a face value of $3,500. How much money did he earn for holding the bond until maturity

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LeonardoVivaldi LeonardoVivaldi · Answer 1 · 2018-02-27T20:15:53+01:00

Answer: $500

Explanation: The face value of any types of bond is the value of the bond at the time of maturity. So, the value of Allan's zero coupon bond is $3,500 because $3,500 is the face value of the bond he bought.

So the money he earns for holding the bond until maturity is the difference when the face value is subtracted to the cost he paid for the bond. Since

$3,500 - $3,000 = $500

Therefore, Allan earned $500 for holding the bond until maturity.