The yield to maturity of a zero-coupon bond with a one-year maturity, a face value of $1,000, and a purchase price of $909 is closest to
A) 10 percent.
B) 11 percent.
C) 9 percent.
D) 5 percent.

Question

Quizplus · Accepted Answer

The yield to maturity (YTM) of a zero-coupon bond can be calculated using the formula: YTM = [(Face Value / Purchase Price)^(1/Time to Maturity)] - 1. Plugging in the given values: YTM = [($1,000 / $909)^(1/1)] - 1 ≈ 0.10 or 10%.

The Yield to Maturity of a Zero-Coupon Bond with a One-Year