You have just purchased a 10-year zero-coupon bond with a yield to maturity of 10% and a par value of $1,000.What would your rate of return at the end of the year be if you sell the bond? Assume the yield to maturity on the bond is 11% at the time you sell.

Question

Quizplus · Accepted Answer

The rate of return is calculated by finding the difference in the bond's price due to the change in yield to maturity. The bond's price decreases when the yield increases, resulting in a small positive return of 1.4%.

You Have Just Purchased a 10-Year Zero-Coupon Bond with a Yield