Calculate the Yield to Maturity of a Zero Coupon Bond

question 77

Multiple Choice

Calculate the yield to maturity of a zero coupon bond with a face value of $1000,maturing in 15 years and selling for a price of $525.75.

• A) 5.62%
• B) 4.38%
• C) 8.74%
• D) 15.26%
• E) 16.27%

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Definitions:

Demand Instrument

A financial document that requires payment of the amount specified on it upon demand by the holder.

Overdue

A state of being late or delayed in completing a payment, task, or fulfilling an obligation beyond the agreed timeframe.

Demand

The desire of purchasers to buy goods or services at a given price, which, combined with supply, determines market prices.

Defect

A flaw or imperfection in a product or system that can lead to its malfunction or inadequacy under expected conditions.