Zero-coupon bonds issued in 1999 are due in 2009.If they are sold at 55 percent of face value,the implied yield to maturity is
A)5.50%
B)6.16%
C)8.31%
D)cannot be determined, need more information

Question

Quizplus · Accepted Answer

To calculate the yield to maturity of a zero-coupon bond, we need to use the following formula:

YTM = ((Face value / Price) ^ (1 / Number of years)) - 1

Plugging in the given values, we get:

YTM = ((100 / 55)^(1/10)) - 1
YTM = 0.0616 or 6.16%

Therefore, the answer is B) 6.16%.

Zero-Coupon Bonds Issued in 1999 Are Due in 2009