National Medical has a zero coupon bond outstanding that sells for $242.60 and has 15 years to maturity. What is the yield to maturity on the bond to the nearest tenth of one percent?

Question

Quizplus · Accepted Answer

The yield to maturity (YTM) can be calculated using the formula for a zero coupon bond: $ P = \frac{F}{(1 + r)^n} $, where $ P $ is the price of the bond ($242.60), $ F $ is the face value (assumed to be $1000), $ r $ is the yield to maturity, and $ n $ is the number of years to maturity (15). Solving for $ r $ gives approximately 9.9%.

National Medical Has a Zero Coupon Bond Outstanding That Sells