Question

Atlantis Fisheries issues zero coupon bonds on the market at a price of $415 per bond. Each bond has a face value of $1,000 payable at maturity in 17 years. What is the yield to maturity for these bonds?

Answer 1

Yield to maturity of zero coupon bond can be calculated by using present value formula
PV= FV/(1+r)^n
Where,
FV= Future Value
PV = Present Value
r = Interest rate
n= periods in number
415= $1000/( 1+r)^17
415/1000=1/(1+r)^17
0.415=1/(1+r)^17
r =5.31%
Correct Answer = 5.31%