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:

Opportunity Cost

The value of the next best alternative forgone as the result of making a decision.

Production Alternative

Different ways in which a firm could allocate its resources to produce various goods or services.

Capital Goods

Physical assets used by a company to produce goods and services that are used to produce consumer goods or services.

Scarcity

The fundamental economic problem of having seemingly unlimited human wants in a world of limited resources.