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:

Internal Rate Of Return

The internal rate of return is a financial metric used to evaluate the profitability of investments, calculating the discount rate that makes the net present value of cash flows from an investment equal to zero.

Hurdle Rate

The minimum rate of return on a project or investment required by a manager or investor, often used in capital budgeting to measure investment risk.

Compound Interest Table

A table that shows the amount of compound interest that will be accrued on a principal amount over a period of time at various interest rates.

Salvage Value

The expected end-of-life value of an asset after its useful period has ended.