Consider the following $1,000-par-value zero-coupon bonds: $\begin{array}{ccc}
&\text { Years of } \
\text { Bond } & \text { Maturity } & \text { Price } \
\hline\text { A } & 1 & \$ 909.09 \
\text { B } & 2 & 811.62 \
\text { C } & 3 & 711.78 \
\text { D } & 4 & 635.52
\end{array}$ The yield to maturity on bond B is

Question

Quizplus · Accepted Answer

The yield to maturity on a zero-coupon bond is the annual rate of return an investor will earn if they hold the bond until maturity. To calculate the yield to maturity, we can use the following formula:$$YTM = \frac{FV - PV}{PV * N}$$Where:* YTM is the yield to maturity* FV is the face value of the bond* PV is the present value of the bond* N is the number of years to maturityUsing this formula, we can calculate the yield to maturity on bond B as follows:$$YTM = \frac{1,000 - 811.62}{811.62 * 2} = 0.1101 = 11.01%$$Therefore, the yield to maturity on bond B is 11%.

Consider the Following $1,000-Par-Value Zero-Coupon Bonds The Yield to Maturity on Bond B Is A) 10

Consider the Following $1,000-Par-Value Zero-Coupon Bonds The Yield to Maturity on Bond B Is
A) 10