The following is a list of prices for zero-coupon bonds with different maturities and par values of $1,000. $\begin{array}{cc}
\text { Maturity }\
\text { (Years) } & \text { Price } \
1 & \$ 943.40 \
2 & 881.68 \
3 & 808.88 \
4 & 742.09
\end{array}$ What is the yield to maturity on a 3-year zero-coupon bond?
A) 6.37%
B) 9.00%
C) 7.33%
D) 10.00%
E) None of the options are correct.

Question

Quizplus · Accepted Answer

The yield to maturity (YTM) for a zero-coupon bond can be calculated using the formula: $ YTM = \left(\frac{Face \ Value}{Price}\right)^{\frac{1}{n}} - 1 $. For a 3-year bond with a price of $808.88 and a face value of $1,000, the YTM is approximately 7.33%.