Assume a zero-coupon bond that sells for $270 will mature in 25 years at $1,850.
ID: 2770010 • Letter: A
Question
Assume a zero-coupon bond that sells for $270 will mature in 25 years at $1,850. Use Appendix B for an approximate answer but calculate your final answer using the formula and financial calculator methods.
What is the effective yield to maturity? (Assume annual compounding. Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)
What is the effective yield to maturity? (Assume annual compounding. Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)
Explanation / Answer
Face value (FV) $ 1,850 Coupon rate 0.00% Number of compounding periods per year 2 Interest per period (PMT) $ - Bond price (PV) $ (270.00) Number of years to maturity 25 Number of compounding periods till maturity (NPER) 50 Bond Yield to maturity RATE(NPER,PMT,PV,FV)*2 Bond Yield to maturity 7.85%
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.