A Zero-Coupon Bond Has a Yield to Maturity of 9

question 9

Multiple Choice

A zero-coupon bond has a yield to maturity of 9% and a par value of $1,000.If the bond matures in 8 years,the bond should sell for a price of _______ today.

• A)422.41
• B)$501.87
• C)$513.16
• D)$483.49
• E)none of the above

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Definitions:

Capital

Financial assets or the financial value of assets, such as cash, properties, and machinery, used by a company to fund its operations and grow.

Saturated

A state or condition where a market has become so full or supplied to its maximum capacity that no further growth or expansion is possible.

Productive Economy

Refers to an economy that efficiently utilizes its resources to produce goods and services that meet the needs and wants of its population.

Commodity

Commodity denotes basic goods used in commerce that are interchangeable with other goods of the same type.