An FI Manager Purchases a Zero-Coupon Bond That Has Two

question 95

Multiple Choice

An FI manager purchases a zero-coupon bond that has two years to maturity.The manager paid $826.45 per $1,000 for the bond.The current yield on a one-year bond of equal risk is 9 percent, and the one-year rate in one year is expected to be either 11.60 percent or 10.40 percent.Either rate is equally probable. What is the yield to maturity for the two-year bond if held to maturity?

• A)11.00 percent.
• B)10.00 percent.
• C)13.54 percent.
• D)11.60 percent.
• E)10.40 percent.

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Definitions:

MRP

Material Requirements Planning, a software-based production planning and inventory control system used to manage manufacturing processes.

Short-Term Scheduling

The process of assigning and managing tasks or resources over a short period of time, typically focused on immediate or near-term objectives.

Cost Reduction

Strategies or actions taken to lower the total expenses incurred by a business.

Strategic Importance

The significance of a plan, decision, or action in achieving long-term objectives and maintaining competitive advantage.