shall we use semi annual comupunding or annual coumpunding in a 10-year zero-coupon bond ?!

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amrcd1

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An investor purchased a 10-year zero-coupon bond with a yield to maturity of 10% and a par value of $1,000. What would her rate of return be at the end of the year if she sells the bond? Assume the yield to maturity on the bond is 9% at the time it is sold and annual compounding periods are used.
A) 16.00%.
B) 17.63%.
C) 15.00%.
D) 19.42%.
shall we use semi annual comupunding or annual coumpunding in a 10-year zero-coupon bond ?!
 
unless otherwise stated use semiannual convention.
here they have stated to use ANNUAL compounding periods CLEARLY!!!
 
I believe the assumption is semi annual compounding unless told otherwise, even though the concept of semi annual compounding a zero is odd
in reality i believe zeros compound continuously though…
 
I always default to semi-annual unless told otherwise.
I do not think it is correct that zero’s compound continuously, but I could be wrong.
 
agree on the semi-annual, thats what the convention is in the book. In this case it states annual.
 
As per CFA book and according to Mr Fabozzi, it should be used semi-annual.
 
yes but what if the problem states annual. Do you use annual of still break it down semiannually?
 
tvPM Wrote:
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> yes but what if the problem states annual. Do you
> use annual of still break it down semiannually?
If it is stated annual not. but only if explictly stated
 
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