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 BBB 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 BBB 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 BBB corporate bond is 5.6%, so the price of a one-year, zero-coupon, BBB corporate bond is equal to:$$100/(1+0.056) = 94.70$$

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