As we know, zero-coupon bonds are issued without any periodic coupon payments. The investor gets the interest and the principal on a maturity date. The interest is the difference between the purchase price and the maturity value. The price of this bond is computed as follows:
V_{0} = M/(1 + r)^{n} .... Eq. (4)
Where,
V_{0} = Value of the bond
M = Maturity value
r = Expected rate of return
n = Period of the bond.