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Suppose a one-year zero-coupon bond with face value $100 is trading at $90.909. The corresponding YTM...

Suppose a one-year zero-coupon bond with face value $100 is trading at $90.909. The corresponding YTM for this bond is ___%

Solutions

Expert Solution

Face value = $100

Years to maturity (T) = 1

Since it is a zero coupon bond, no interest paid is paid.

Present value of the bond = Face value * 1 / (1 + YTM)T

$90.909 = $100 * 1 / (1 + YTM)1

(1 + YTM) = $100 / $90.909

(1 + YTM) = 1.1000

YTM = 0.1000

YTM = 10.00%

So, Corresponding YTM for the bond is 10.00%

jeff jeffy answered 2 years ago
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