Consider the following $1,000 par value zero-coupon bonds: $$\begin{array} { l | l | l | }
\underline { \text { Bond } } & \underline { \text { Years to Maturity } } & \underline { \text { Price } } \
\hline \mathrm { A } & \mathbf { 1 } & \$ 909.09 \
\hline \mathrm { B } & 2 & \$ 811.62 \
\hline \mathrm { C } & 3 & \$ 711.78 \
\hline \mathrm { D } & 4 & \$ 635.52 \
\hline
\end{array}$$
-The yield to maturity on bond C is ____________.
Refer To:
1456

Question

Consider the following $1,000 par value zero-coupon bonds: $$\begin{array} { l | l | l | } 
\underline { \text { Bond } } & \underline { \text { Years to Maturity } } & \underline { \text { Price } } \
\hline \mathrm { A } & \mathbf { 1 } & \$ 909.09 \
\hline \mathrm { B } & 2 & \$ 811.62 \
\hline \mathrm { C } & 3 & \$ 711.78 \
\hline \mathrm { D } & 4 & \$ 635.52 \
\hline
\end{array}$$
-The yield to maturity on bond C is ____________.
Refer To:
1456

Quizplus · Accepted Answer

The yield to maturity can be found by trial and error or by using a financial calculator. Using a financial calculator, we input the following: 
N = 3 (years to maturity for bond C)
PV = -711.78 (the current price of bond C)
FV = 1000 (the face value or par value of the bond)
PMT = 0 (since it is a zero-coupon bond, there are no coupon payments)
Solving for I/Y (the yield to maturity), we get 12%. Therefore, the answer is C) 12%.

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