The yield to maturity of a 20-year zero coupon bond that is selling for $372.50 with a value at maturity of $1,000 is ________.

Question

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The yield to maturity of a zero-coupon bond is the annual rate of return an investor can expect to receive if they hold the bond until maturity. The formula for calculating the yield to maturity of a zero-coupon bond is:YTM = (FV / PV)^(1/n) - 1where:YTM = yield to maturityFV = face value of the bondPV = present value of the bondn = number of years to maturityIn this case, the face value of the bond is $1,000, the present value of the bond is $372.50, and the number of years to maturity is 20. Plugging these values into the formula, we get:YTM = (1000 / 372.50)^(1/20) - 1 = 0.051 = 5.1%Therefore, the yield to maturity of the bond is 5.1%.

The Yield to Maturity of a 20-Year Zero Coupon Bond