A Government of Canada Zero-Coupon Bond Has a Yield to Maturity

question 49

Multiple Choice

A Government of Canada zero-coupon bond has a yield to maturity of 4%.Investors believe that AB Company will default with certainty at the end of 1 year,only being able to pay 85% of its obligations.The company's bond promises $5,000 next year.What is the price of a one-year zero-coupon bond issued by AB Company?

• A)$4,450
• B)$4,250
• C)$4,086.54
• D)$5,000
• E)$4,278.85

---

Definitions:

Main Circuit Board

The main circuit board, often called a motherboard, is the primary printed circuit board (PCB) in computers and other electronic devices, hosting the central processing unit and providing connectors for other peripherals.

Computer

Any of a number of different types of electronic processing devices with a CPU, input circuit, data retention, and output switching.

Motherboard

The main printed circuit board in a computer that interconnects the central processing unit (CPU), memory, and other components.

Generic ESTs

A term that could refer to generic Electronic Service Tools, which are software applications used for diagnostics and programming of electronic systems in vehicles or machinery.