A Zero-Coupon Bond Has a Yield to Maturity of 5

question 67

Multiple Choice

A zero-coupon bond has a yield to maturity of 5% and a par value of $1,000. If the bond matures in 16 years, it should sell for a price of ________ today.

• A) $458.11
• B) $641.11
• C) $789.11
• D) $1,100.11

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Definitions:

Marginal Cost

The additional cost incurred from producing one more unit of a good or service.

Competitive Market

A market structure characterized by many buyers and sellers, where no single entity has the power to influence market prices.

Profit

Profit is the financial benefit realized when the amount of revenue gained from a business activity exceeds the expenses, costs, and taxes involved in maintaining the activity.

Short-Run Equilibrium

A situation in a market where demand equals supply, resulting in a stable price level, but which may not reflect long-term market dynamics.