Your firm has issued ten-year zero-coupon bonds with a $1,000 face value. If the bonds are currently selling for $514.87. What is the yield to maturity?

Question

Quizplus · Accepted Answer

The yield to maturity (YTM) for a zero-coupon bond can be calculated using the formula: YTM = [(Face Value / Present Value)^(1/n)] - 1, where n is the number of years to maturity. Plugging in the values: YTM = [(1000 / 514.87)^(1/10)] - 1 = 0.0675 or 6.75%.

Your Firm Has Issued Ten-Year Zero-Coupon Bonds with a $1,000