You hold a zero-coupon bond with a $1,000 par value and 10 years left until matu

Question

You hold a zero-coupon bond with a $1,000 par value and 10 years left until maturity in your Income and Growth Portfolio. According to your financial advisor, the bond's current market price is $459.

Based on this information, the yield to maturity on this bond is closest to:

You hold a zero-coupon bond with a $1,000 par value and 10 years left until maturity in your Income and Growth Portfolio. According to your financial advisor, the bond's current market price is $459.

Based on this information, the yield to maturity on this bond is closest to:

Explanation / Answer

Yield to Maturity = (Face Value / Current Price of Bond) ^ (1 / Years to Maturity) - 1

Yield to Maturity = ( 1000 / 459)1/10 - 1

Yield to Maturity = 1.080983 - 1

Yield to Maturity = 0.080983 or 8.098%

Related Questions

Navigate

• Browse (All)
• Browse Y
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.