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 A 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 A is

Quizplus · Accepted Answer

The yield to maturity (YTM) for a zero-coupon bond can be calculated using the formula: $$ \text{YTM} = \left( \frac{\text{Face Value}}{\text{Price}} \right)^{\frac{1}{\text{Years to Maturity}}} - 1 $$ For bond A, this calculation is: $$ \text{YTM} = \left( \frac{1000}{909.09} \right)^{\frac{1}{1}} - 1 = 1.10 - 1 = 0.10 $$ or 10%.

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

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