Jack buys a 4-year zero coupon bond with a $1,000 maturity value for a Price of $683. What is Jack's annual compound yield at the end of 4 years?

Name: Jack buys a 4-year zero coupon bond with a $1,000 maturity value for a Price of $683. What is Jack's annual compound yield at the end of 4 years?
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Question

Quizplus · Accepted Answer

Zero Coupon Bond: ACY = [FV / PV]^1/n - 1 
= [Maturity Value / Bond Price]^1/4 - 1 
Zero Coupon Bond Price = [(1000/683]^1/4 - 1 = [1.464]^.25 - 1 = .10 or 10%

Jack Buys a 4-Year Zero Coupon Bond with a $1,000