Consider the following $1,000 par value zero-coupon bonds: $$\begin{array} { l c c }
\text { Bond } &\text { Years to Maturity } & \text { Price } \
\hline \text { A } & 1 & \$ 909.09 \
\text { B } & 2 & \$ 811.62 \
\text { C } & 3 & \$ 711.78 \
\text { D } & 4 & \$ 635.52
\end{array}$$
The yield to maturity on bond A is ____________.

Question

Consider the following $1,000 par value zero-coupon bonds: $$\begin{array} { l c c } 
\text { Bond } &\text { Years to Maturity } & \text { Price } \
\hline \text { A } & 1 & \$ 909.09 \
\text { B } & 2 & \$ 811.62 \
\text { C } & 3 & \$ 711.78 \
\text { D } & 4 & \$ 635.52
\end{array}$$
The yield to maturity on bond A is ____________.

Quizplus · Accepted Answer

The yield to maturity (YTM) for a zero-coupon bond is calculated using the formula: YTM = [(Face Value / Price)^(1/Years to Maturity)] - 1. For bond A: YTM = [(1000 / 909.09)^(1/1)] - 1 = 0.10 or 10%.

Consider the Following $1,000 Par Value Zero-Coupon Bonds The Yield to Maturity on Bond a Is ____________