If a One-Year Zero-Coupon Bond Has a Face Value of $100

question 26

Multiple Choice

If a one-year zero-coupon bond has a face value of $100, is purchased for $94, and is held to maturity the:

• A) holding period return will exceed the yield to maturity.
• B) yield to maturity will exceed the holding period return.
• C) yield to maturity will be 6.38%.
• D) holding period return is 6.0%.

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Definitions:

Annuity Payment

Regular payments received from an annuity investment over a specified period.

Contract Cost

is the total expense that a company recognizes on its books for a specific contract over its duration, encompassing labor, materials, and overhead.

Deductible IRA Contribution

A contribution to an Individual Retirement Account (IRA) for which the taxpayer can claim a tax deduction, subject to certain conditions and limits.

Pension Plan

A retirement plan funded by employers or employees, or both, paying out a fixed sum to retirees, often based on salary and years of service.