What is the annual implied interest of a five-year zero-coupon bond (using the semiannual pricing convention) with a current yield of 12% and a par value of $1,000.00?

This is the implied annual interest rate of a zero-coupon five-year bond, with an initial par value of $1000 and a yield currently of 12 percent. The interest rate can be calculated using the two-year payment schedule and dividing by 12.

To determine the amount of money that will have to be paid at maturity, we must calculate PV for each period. To do this, we must first find the number of periods—which in this case would be 10 as there are 5 years and payments are made every six months. We can then calculate the PV by using this information and the annual implied rate of interest ($1,000.00) along with par value.

PV = FV/(1 + r).

The formula FV = Face Value, where r=Annual Implied Rate of Interest, and n=Number Periods

Filling in our numbers above yields a PV figure of $558.45 each for each period. Multiplying by 10, we arrive at the amount payable upon maturity, which amounts to $5584.50.

The annual implied interest rate for a Five-Year No Coupon Bond with a Current Yield of 12 % and if it is paid semiannually, will be 6%. At maturity, the total debt would be $5584.50