The yield to maturity of a 20-year zero-coupon bond that is selling for $372.50 with a value at maturity of $1,000 is

Question

Quizplus · Accepted Answer

The yield to maturity is the annual rate of return an investor can expect to receive if they hold the bond until maturity. It is calculated as follows:YTM = (FV / PV)^(1/n) - 1where:FV = face value of the bondPV = present value of the bondn = number of years to maturityIn this case, the FV is $1,000, the PV is $372.50, and the n is 20. Plugging these values into the formula, we get:YTM = (1000 / 372.50)^(1/20) - 1 = 0.051 = 5.1%Therefore, the yield to maturity of the bond is 5.1%.

The Yield to Maturity of a 20-Year Zero-Coupon Bond That