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

$1,000/(1.10)^10 = $385.54; $1,000/(1.11)^9 = $390.92; ($390.92 - $385.54)/$385.54 = 1.4%.

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