Use the table for the question(s) below.
Consider the following yields to maturity on various one-year zero-coupon securities:
$\begin{array} { l c }
\hline \text { Security } & \text { Yield (\%) } \
\hline \text { Treasury } & 4.6 \
\hline \text { AAA corporate } & 4.8 \
\hline \text { BBB corporate } & 5.6 \
\hline \text { B Corporate } & 6.2 \
\hline
\end{array}$
-The price (expressed as a percentage of the face value) of a one-year, zero-coupon corporate bond with a AAA rating is closest to:

Question

Use the table for the question(s) below.
Consider the following yields to maturity on various one-year zero-coupon securities:
$\begin{array} { l c } 
\hline \text { Security } & \text { Yield (\%) } \
\hline \text { Treasury } & 4.6 \
\hline \text { AAA corporate } & 4.8 \
\hline \text { BBB corporate } & 5.6 \
\hline \text { B Corporate } & 6.2 \
\hline
\end{array}$
-The price (expressed as a percentage of the face value) of a one-year, zero-coupon corporate bond with a AAA rating is closest to:

Quizplus · Accepted Answer

The price of a one-year, zero-coupon bond is equal to the present value of its face value, discounted at the yield to maturity. The yield to maturity for a AAA corporate bond is 4.8%, so the price of a one-year, zero-coupon AAA corporate bond is:$$Price = \frac{Face Value}{(1 + Yield)^{1}} = \frac{100}{(1 + 0.048)^{1}} = 95.42$$

Use the Table for the Question(s) Below -The Price (Expressed as a Percentage of the Face Value)