Use the Table for the Question(s) Below -The Yield to Maturity for the Two-Year Zero-Coupon Bond Is

question 2

Multiple Choice

Use the table for the question(s) below.
The following table summarises prices of various default-free zero-coupon bonds (expressed as a percentage of face value) :
$\begin{array} { l c c c c c } \hline \text { Maturity (years) } & \mathbf { 1 } & \mathbf { 2 } & \mathbf { 3 } & \mathbf { 4 } & \mathbf { 5 } \\\hline \text { Price (per \$100 face value) } & 94.52 & 89.68 & 85.40 & 81.65 & 78.35 \\\hline\end{array}$
-The yield to maturity for the two-year zero-coupon bond is closest to?

• A) 5.5%
• B) 5.6%
• C) 5.8%
• D) 6.0%

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Definitions:

Supply Shift

A change in the quantity of a product or service that producers are willing and able to sell at all prices, due to factors like technology, production costs, or number of sellers.

Normative Analysis

A type of analysis concerned with what ought to be, focusing on value judgments and statements of what is good or bad.

Socially Desirable

Actions or policies that are beneficial for society as a whole, often considering long-term benefits over short-term gains.

Producer Surplus

The difference between the amount that producers are willing to sell a good for and the actual amount received by them after selling it.