Calculate the Yield-To-Maturity of a Zero-Coupon Bond That Costs $650

question 45

Multiple Choice

Calculate the yield-to-maturity of a zero-coupon bond that costs $650 today and will pay $1,000 at the end of five years. Round your answer to the nearest tenth of a percent.

• A)8.6%
• B)9.0%
• C)5.4%
• D)none of the above

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Definitions:

Opportunity Cost

The cost of forgoing the next best alternative when making a decision, reflecting the potential benefits one misses out on when choosing one option over another.

Bowed Outward

Describes a curve on a graph, typically a production possibility frontier, indicating increasing opportunity costs when shifting resources between two goods.

Opportunity Cost

The cost of choosing one option over another, typically the best alternative forgone as a result of making a decision.

Efficient

Efficiency refers to the optimal production and distribution of resources in a way that best meets the needs and desires of consumers.