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 internal rate of return (IRR)of this investment,assuming the yield to maturity does not change?

Question

Quizplus · Accepted Answer

The internal rate of return (IRR) for a zero-coupon bond, when the yield to maturity does not change, is equal to the yield to maturity. Since the bond's yield to maturity is 6%, the IRR of the investment is also 6%.

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