Calculate the Yield to Maturity of a Zero-Coupon Bond with a Face

question 104

Multiple Choice

Calculate the yield to maturity of a zero-coupon bond with a face value of $1000, maturing in 10 years and selling for a price of $529.30.

• A) 6.57 percent
• B) 8.45 percent
• C) 4.16 percent
• D) 10.23 percent
• E) 12.17 percent

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Definitions:

Dividend Policy

A company's strategy or set of guidelines for distributing earnings to shareholders in the form of dividends.

Taxes

Taxes refer to the compulsory financial charge or some other type of levy imposed upon a taxpayer by a governmental organization in order to fund government spending and various public expenditures.

Transaction Costs

Expenses incurred when buying or selling a good or service, including broker's fees, taxes, or costs related to the time and labor involved in making the transaction.

NPV Projects

Projects evaluated using Net Present Value, a method for determining the present value of future cash flows, minus the initial investment.