1. ## coupons

what is the price of a five year, zero coupon, default free security with a face value of \$1000

2. Is there an expected return or is this just stuffing it in a matress?

3. $1,000(1 + r)^{-5}$ ... where r is your risk-free rate (expressed as an annual rate), will price the zero for ya.

This assumes annual compounding; if your risk-free rate is given to you in a form that contemplates a different compounding period, you'll have to adjust the pricing formula accordingly.

Cheers!