A Zero-Coupon Bond Has a Yield to Maturity of 11

question 19

Multiple Choice

A zero-coupon bond has a yield to maturity of 11% and a par value of $1,000.If the bond matures in 27 years, the bond should sell for a price of _______ today.

• A)$59.74
• B)$501.87
• C)$513.16
• D)$483.49 $1,000/(1.11)²⁷ = $59.74.

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Definitions:

GAAP

Generally Accepted Accounting Principles, a common set of accounting principles, standards, and procedures that companies must follow when they compile their financial statements.

Segment Assets

Assets that are allocated to a company's operational segments or divisions for the purpose of financial reporting.

Price/Earnings Ratio

A valuation metric for a company that measures its current share price relative to its per-share earnings.

Preferred Dividends

Payments made to preferred shareholders, often at a fixed rate, that take precedence over dividends to common shareholders.