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Homework answers / question archive / A zero-coupon bond has a face value of $1000 and a market value of $800

A zero-coupon bond has a face value of $1000 and a market value of $800

Finance

A zero-coupon bond has a face value of $1000 and a market value of $800. The bond will mature in 5 years. What is its yield to maturity?

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We can calculate the yield to maturity by using the following formula in excel:-

=rate(nper,pmt,-pv,fv)

Here,

Rate = Yield to maturity

Nper = 5 periods

Pmt = 0

PV = $800

FV = $1,000

Substituting the values in formula:

= rate(5,0,-800,1000)

= 4.56%

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