What Is the Yield to Maturity on a 15-Year, Zero-Coupon

question 130

Multiple Choice

What is the yield to maturity on a 15-year, zero-coupon bond selling for 37.5% of par value?

• A) 4.40%
• B) 5.60%
• C) 5.97%
• D) 6.76%
• E) 37.50%

---

Definitions:

Indirect Bankruptcy Cost

Expenses that a company incurs when it approaches bankruptcy that do not include actual legal and other direct costs, such as lost sales, damage to reputation, and management distraction.

Bankruptcy Court

A specialized federal court dealing with cases involving individuals or businesses that cannot repay their outstanding debts.

Business Risk

The exposure to factors that may cause a business to experience lower profits or financial loss.

Financial Risk

The possibility of losing money on an investment or business venture due to various factors including market fluctuations, economic conditions, or management decisions.