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

question 95

Multiple Choice

An FI manager purchases a zero-coupon bond that has two years to maturity.The manager paid $826.45 per $1,000 for the bond.The current yield on a one-year bond of equal risk is 9 percent, and the one-year rate in one year is expected to be either 11.60 percent or 10.40 percent.Either rate is equally probable. What is the yield to maturity for the two-year bond if held to maturity?

• A)11.00 percent.
• B)10.00 percent.
• C)13.54 percent.
• D)11.60 percent.
• E)10.40 percent.

---

Definitions:

Development Programs

Structured educational or training programs designed to enhance the skills, competencies, and knowledge of employees or individuals.

Overseas Assignments

Work tasks or roles assigned to employees that require them to relocate to foreign countries for a certain period.

Cost-Cutting Measure

Strategies or actions implemented by a company to reduce its expenses and improve profitability.

Shareholder Value

The financial worth that a company delivers to its shareholders, often measured by stock price appreciation and dividend payouts.