are zero coupon bonds compounded semiannually or annually? If YTM of a 10 year zero coupon bond is 8 percent should we use 4 as I/Y and 20 as N? or 8 as I/Y and 10 as N?
Despite the fact that they are zero-coupon bonds, standard practice is to calculate their price assuming semi-annual compounding. So you are correct using i=4% and N=20.
If I am not wrong, you have to assume semi-annual compounding for CFA exams unless stated explicitly.
US bonds are compounded semi-annual and EUR bonds annually.
AFers please correct if above is not true.
This site uses cookies to help personalise content, tailor your experience and to keep you logged in if you register.
By continuing to use this site, you are consenting to our use of cookies.