Response to the following problem:
The Cipher Corporation issued a zero-coupon that matures in eight years. Suppose you purchased one of these bonds with a maturity value of $1,000 for $400 on January 1, Year 1. The bond was issued at $400. This bond matures on December 31, Year 8.
a. If you bought this bond when it was issued for $400 and held it to maturity, what return would you earn?
b. What is the amount of interest expense per bond that Cipher deducts each year per $1,000 maturity value?