Consider a $1,000-par-value 20-year zero-coupon bond issued at a yield to maturity of 10%.If you buy that bond when it is issued and continue to hold the bond as yields decline to 9%, the imputed interest income for the first year of that bond is

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The imputed interest income for the first year of that bond is $14.87. This is because the bond was issued at a yield to maturity of 10%, and the yield has declined to 9%. The difference between these two yields is 1%, which is the imputed interest income for the first year.

Consider a $1,000-Par-Value 20-Year Zero-Coupon Bond Issued at a Yield