A ten-year, zero-coupon bond with a yield to maturity of 6% has a face value of $1000. An investor purchases the bond when it is initially traded, and then sells it four years later. What is the rate of return of this investment, assuming the yield to maturity does not change?

Question

Quizplus · Accepted Answer

The rate of return for a zero-coupon bond held to maturity is equal to the yield to maturity. Since the yield to maturity does not change, the rate of return remains 6.00%.

A Ten-Year, Zero-Coupon Bond with a Yield to Maturity of 6