The Prices of Three Zero-Coupon Bonds Are Provided in the Table

question 80

Multiple Choice

The prices of three zero-coupon bonds are provided in the table below.All three bonds have a face value of $1,000.The three bonds have three different terms to maturity.What is the yield on the bond with 2 years to maturity?

• A) 4.07%
• B) 4.16%
• C) 4.02%
• D) 3.59%
• E) 3.98%

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Definitions:

External Financing

External financing involves acquiring capital from outside sources to fund business operations and investments, such as through loans, issuing equity, or other forms of financial support from outside the company.

Total Production Costs

The combined costs of materials, labor, and overhead incurred in producing goods.