Consider the following $1,000-par-value zero-coupon bonds: $\begin{array}{ccc}
\text { Bond } & \text { Years of } & \text { Price }\
&\text { Maturity }\
\text { A } & 1 & \$ 909.09 \
\text { B } & 2 & 811.62 \
\text { C } & 3 & 711.78 \
\text { D}& 4 & 635.52
\end{array}$

The yield to maturity on bond B is

Question

Consider the following $1,000-par-value zero-coupon bonds: $\begin{array}{ccc}
\text { Bond } & \text { Years of } & \text { Price }\
&\text { Maturity }\
\text { A } & 1 & \$ 909.09 \
\text { B } & 2 & 811.62 \
\text { C } & 3 & 711.78 \
\text { D}& 4 & 635.52
\end{array}$

The yield to maturity on bond B is

Quizplus · Accepted Answer

The yield to maturity (YTM) for a zero-coupon bond can be calculated using the formula: $$ \text{Price} = \frac{\text{Par Value}}{(1 + \text{YTM})^n} $$ where $n$ is the number of years to maturity. For bond B, we have: $$ 811.62 = \frac{1000}{(1 + \text{YTM})^2} $$ Solving for YTM gives approximately 11%, making option B correct.

Consider the Following $1,000-Par-Value Zero-Coupon Bonds The Yield to Maturity on Bond B Is A) 10

Consider the Following $1,000-Par-Value Zero-Coupon Bonds The Yield to Maturity on Bond B Is
A) 10