Which of the following risk-free, zero-coupon bonds could be bought for the lowest price?
A) one with a face value of $1,000, a YTM of 4.8%, and 5 years to maturity
B) one with a face value of $1,000, a YTM of 3.2%, and 8 years to maturity
C) one with a face value of $1,000, a YTM of 6.8%, and 10 years to maturity
D) one with a face value of $1,000, a YTM of 5.9%, and 20 years to maturity

Question

Quizplus · Accepted Answer

A) Price = $1,000 / (1 + 4.8%)⁵ = $791 B) Price = $1,000 / (1 + 3.2%)⁸ = $777 C) Price = $1,000 / (1 + 6.8%)¹⁰ = $518 D) Price = $1,000 / (1 + 5.9%)²⁰ = $318 (lowest price)

Which of the Following Risk-Free, Zero-Coupon Bonds Could Be Bought