An FI Manager Purchases a Zero-Coupon Bond That Has Two

question 30

Multiple Choice

An FI manager purchases a zero-coupon bond that has two years to maturity.The manager paid $76.95 per $100 for the bond.The current yield on a one-year bond of equal risk is 12 percent, and the one-year rate in one year is expected to be either 16.65 percent or 15.35 percent.Either rate is equally probable. What is the yield to maturity for the two-year bond if held to maturity?

• A)27.99 percent.
• B)13.54 percent.
• C)29.95 percent.
• D)14.00 percent.
• E)11.53 percent.

---

Definitions:

Hallucinations

Sensory experiences that appear real but are created by the mind, without external stimuli, and can affect all senses.

Binge-Eating Disorder

A condition in which a person overeats, or binges, on enormous amounts of food at one sitting, but unlike bulimia nervosa, the individual does not then purge or use other unhealthy methods to avoid weight gain.

Bulimia Nervosa

An eating disorder characterized by episodes of binge eating followed by behaviors to prevent weight gain, such as self-induced vomiting, excessive exercise, or the use of laxatives.

Purge

To remove or eliminate something undesirable completely, often used in the context of emotional or physical cleansing.