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.

---

Definitions:

Physical Processes

Natural phenomena involving the laws of physics, affecting the physical and chemical properties of substances.

Critical Periods

Designates specific times during development when the presence or absence of certain experiences can have profound effects on future neurological and psychological growth.

Sensitive Periods

Times in an individual's development when they are more responsive to certain stimuli and quicker to learn particular skills.

Psychosocial Domain

Relates to the psychological development in the context of a social environment, including the effects of social factors on individual psychological processes.