The yield to maturity on a 30-year zero-coupon bond that is presently quoted at 42 is closest to:

Question

Quizplus · Accepted Answer

The yield to maturity (YTM) on a zero-coupon bond can be calculated using the formula: $$YTM = \left( \frac{Face\ Value}{Present\ Value} \right)^{\frac{1}{n}} - 1$$ where $n$ is the number of years until maturity. Assuming a face value of 100 (as is standard unless otherwise specified), and a present value of 42 (the quoted price), for a 30-year bond, the calculation is: $$YTM = \left( \frac{100}{42} \right)^{\frac{1}{30}} - 1$$ This calculation results in a YTM of approximately 2.91%, making option B the closest answer.

The Yield to Maturity on a 30-Year Zero-Coupon Bond That