What Is the Yield to Maturity of a Zero-Coupon Bond

question 30

Multiple Choice

What is the yield to maturity of a zero-coupon bond that sells for $990 and will pay $1,000 in one year?

• A) 0.1%
• B) 1.0%
• C) 1.1%
• D) 10.0%
• E) 11.0%

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Definitions:

Cumulative Preferred Stock

A type of preferred stock where dividends accrue if not paid in a given year and must be paid out before any dividends can be distributed to common stockholders.

Declared Dividends

The portion of a company's earnings that has been set aside to be paid out to shareholders, officially announced by its board of directors.

Basic Earnings

The amount of profit earned by a company on a per-share basis, before any deductions or adjustments.

Noncumulative

Pertains to dividends that, if missed by a company, are not required to be paid out to shareholders in the future.