A 15-Year Zero Coupon Bond Has a Yield to Maturity

question 106

Multiple Choice

A 15-year zero coupon bond has a yield to maturity of 8 percent and a maturity value of $1,000.What is the amount of tax that an investor in the 30 percent tax bracket would pay during the first year of owning the bond?

• A) $7.57
• B) $10.41
• C) $15.89
• D) $20.44
• E) $25.22

Understand and calculate the future value of investments.

Recognize which financial problems require present value calculations and which do not.

Understand the concept and applications of RRSP (Registered Retirement Savings Plan) contributions and growth over time.

Calculate the future value of annuities, both deferred and ordinary, including those increasing at a compounded rate.

---

Definitions:

Public Aid Programs

Government initiatives designed to provide financial assistance, healthcare, food support, and housing to individuals or families in need.

Means-Tested

Programs or benefits that are only available to individuals or families who fall below a certain income threshold.

Monetary Benefit

Financial gains obtained from an action, investment, or decision, quantifiable in terms of money.

Perverse Incentives

Incentives that have unintended and undesirable results, contrary to the interests of the incentive makers.