The Yield to Maturity of a 20-Year Zero-Coupon Bond That

question 57

Multiple Choice

The yield to maturity of a 20-year zero-coupon bond that is selling for $372.50 with a value at maturity of $1,000 is

• A)5.1%.
• B)8.8%.
• C)10.8%.
• D)13.4%.
• E)None of the options

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Definitions:

Annual Dividend

A payment made by a corporation to its shareholders, usually as a distribution of profits on a yearly basis.

Dividends Increase

An action by a company to increase the amount of dividends paid to shareholders, typically signaling confidence in the company's profitability.

Rate of Return

The success or failure of an investment over a determined timeframe, depicted as a percentage of the investment’s original stake.

Constant Dividend

A policy where a company pays out a fixed amount in dividends to shareholders on a regular basis, regardless of the company's earnings fluctuations.