A Ten-Year,zero-Coupon Bond with a Yield to Maturity of 6

question 30

Multiple Choice

A ten-year,zero-coupon bond with a yield to maturity of 6% has a face value of $1000.An investor purchases the bond when it is initially traded,and then sells it four years later.What is the internal rate of return (IRR) of this investment,assuming the yield to maturity does NOT change?

• A)0.26%
• B)3.07%
• C)6.00%
• D)7.65%
• E)8.14%

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Definitions:

Gain-Sharing Plans

Incentive strategies that reward employees for their contributions to a company's success, usually through improved efficiency and productivity, resulting in financial gains shared among staff.

Monetary

Pertaining to money or currency, especially in terms of the management, circulation, and control of money in an economy.

Net Profits

The amount of money that remains after all operating expenses, taxes, and interest are deducted from a company's total revenue.

Stock Options

Financial instruments that give employees the right to buy or sell shares of their company's stock at a predetermined price.