A ten-year,zero-coupon bond with a yield to maturity of 6% has a face value of $1000.An investor purchases the bond when it is initially traded,and then sells it four years later.What is the internal rate of return (IRR)of this investment,assuming the yield to maturity does NOT change?
A)0.26%
B)3.07%
C)6.00%
D)7.65%
E)8.14%

Question

Quizplus · Accepted Answer

The IRR of this investment remains at 6% because the yield to maturity is assumed not to change over the period of the investment. The yield to maturity is a constant that reflects the total return of the bond if held to maturity, and since the question specifies it does not change, the IRR for the investor over the four-year period would also be 6%.

A Ten-Year,zero-Coupon Bond with a Yield to Maturity of 6