The Following Is a List of Prices for Zero Coupon

question 45

Multiple Choice

The following is a list of prices for zero coupon bonds with different maturities and par value of $1,000. $$\begin{array} { | l | l | } \hline \text { Maturity (Years) } & \underline { \text { Price } } \\\hline 1 & \$ 943.40 \\\hline 2 & \$ 881.68 \\\hline 3 & \$ 808.88 \\\hline 4 & \$ 742.09 \\\hline\end{array}$$
-What is the yield to maturity on a 3-year zero coupon bond?

• A)6.37%
• B)9.00%
• C)7.33%
• D)10.00%
• E)none of the above

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Definitions:

EBIT

A financial metric that measures a firm's profit from its usual business operations, essentially its earnings before deducting interest and taxes.

EBIT-EPS Analysis

A tool used in financial analysis to determine the impact of leverage on a company's earnings per share (EPS) by holding earnings before interest and taxes (EBIT) constant.

Leverage Levels

The degree to which a business or investor is utilizing borrowed money.

EPS

Earnings Per Share, a company's profit divided by its number of outstanding shares of common stock, indicating how much money each share earns.