The present value of all anticipated future cash flows from the bond constitutes the price or value of a zero coupon bond. The bond's face value is the only cash flow because no interest payments are made; this cash flow occurs when the bond matures.
Date of Settlement: 2000,1; Date of Maturity: 20171,1
Discount rate: 0
Discount each year: 2
Exchange Value: 100
Yield to technology: 0.049
Dollar Par Value: 10000
Dollar Price: $4391.30
Even though a bondholder with a zero coupon does not really get the money until the bond matures, the IRS stipulates that the bondholder must pay accumulated income tax. 1 It is known as imputed interest. Zero-coupon bonds can be long-term investments because they frequently have maturities of ten years or longer.
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