Question

In: Finance

A zero-coupon bond with face value $1,000 and maturity of four years sells for $737.22. a....

A zero-coupon bond with face value $1,000 and maturity of four years sells for $737.22.

a. What is its yield to maturity? (Round your answer to 2 decimal places.)

b. What will the yield to maturity be if the price falls to $721?

Solutions

Expert Solution

a

Calculator
Inputs:
PV                  (737.220)
PMT                               -  
FV                   1,000.00
N                                4
Output:
I/Y = IRR 7.92%

Answer is:

7.92%

b

Calculator
Inputs:
PV                  (721.000)
PMT                               -  
FV                   1,000.00
N                                4
Output:
I/Y = IRR 8.52%

Answer is:

8.52%

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