Question: Actuarial Science Question: You have a choice of investing in two different bonds:
1) A zero coupon bond that will pay 1000 at the end of 9 years and has a current price of $591.90 or
2) A 1000 par value bond with 2.5% coupons payable semi-annually (so, 5% per year) that will pay $1000 at the end of 10 years. If you pay Q you will earn the same annual effective interest rate as the zero coupon bond.