Finance School of management Pure Discount bonds F=P(1+ F—P In this equation, P is the present value or price of the bond f is the face or future value n is the investment period i is the yield-to-maturity uesTc
11 Finance School of Management Pure Discount Bonds (1 ) 1 1 − = + = n n P F F P i i ❖ In this equation, – P is the present value or price of the bond – F is the face or future value – n is the investment period – i is the yield-to-maturity
Finance School of management Pure Discount bonds a two-year pure discount bond with a face value of$1, 000 and a price of $880 F 1000 1=6.60% P 880 n 1 Pv FV PMt Result 88010000 =660 uesTc 12
12 Finance School of Management Pure Discount Bonds 1 6.60% 880 1000 1 2 1 1 − = − = = n P F i n i PV FV PMT Result 2 ? 880 1000 0 i=6.60% ❖ A two-year pure discount bond with a face value of $1,000 and a price of $880