Consider a $1,000-Par-Value 20-Year Zero-Coupon Bond Issued at a Yield

question 17

Multiple Choice

Consider a $1,000-par-value 20-year zero-coupon bond issued at a yield to maturity of 10%. If you buy that bond when it is issued and continue to hold the bond as yields decline to 9%, the imputed interest income for the first year of that bond is

• A) zero.
• B) $14.87.
• C) $45.85.
• D) $7.44.
• E) None of the options are correct.

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