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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. The bond will mature in 5 years. What is its yield to maturity?
Expert Solution
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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