8.7 Zero coupon bonds: Ten-year zero coupon bonds issued by the US. Treasury have a face value of $1,000 and interest is compounded semiannually. If similar bonds in the market yield 10.5 percent, what is the value of these bonds? L0 1, L0 2 Solution: Years to maturity = n = 10 Frequency of payment = m = 2 Coupon rate = C = 0% Current market rate = 1' = 10.5% 0 1 2 3 4 5 G 20 ||l|l|l | $0 $0 $0 $0 $0 $0 $0