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Limberis Bio has zero-coupon bonds with a current market price of $725.00 with a face value...

Limberis Bio has zero-coupon bonds with a current market price of $725.00 with a face value of $1000, that mature in 7 years. What is the annual yield to maturity? Please show your work here. One or two decimal places is sufficient.

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Expert Solution

As we know the formula for Zero Coupon Bond Yield = (FV/PV)^(1/n) -1

FV = Face Value =$ 1000

PV = Present Market Value = $725

n = No of years to maturity =7 years

YTM = (1000/725) ^(1/7) -1

= (1.3793103448)^(1/7) -1

= 1.0470121304 - 1

= 0.047012

= 4.7%

jeff jeffy answered 2 years ago
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