Question

In: Finance

A firm issues zero-coupon bonds with a face value of $1,000 and time to maturity of...

A firm issues zero-coupon bonds with a face value of $1,000 and time to maturity of 9 years. The bonds are currently trading at $722.7. What is the yield on this bond? Answer in percent, rounded to two decimal places. (e.g., 5.67%=5.67)

Solutions

Expert Solution

Yield = (FV / PV)^(1/t) - 1

Yield = ($1,000 / $722.7)^(1/9) - 1

Yield = 0.0367 or 3.67%


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