(Bonds) A zero-coupon bond has a $1,000 par value, 9 years to maturity, and sells for...

(Bonds) A zero-coupon bond has a $1,000 par value, 9 years to maturity, and sells for $527.82. What is its yield to maturity? Assume annual compounding. Record your answer to the nearest 0.01% (no % symbol). E.g., if your answer is 3.455%, record it as 3.46.

Solutions

Expert Solution

Value of bond=Par value/(1+yield to maturity)^time period

527.82=1000/(1+yield to maturity)^9

(1000/527.82)=(1+yield to maturity)^9

(1000/527.82)^(1/9)=(1+yield to maturity)

(1+yield to maturity)=1.07358122

yield to maturity=1.07358122-1

=7.36(Approx)

jeff jeffy answered 2 years ago

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