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Consider a zero-coupon bond with a current price of $909
Consider a zero-coupon bond with a current price of $909.09 and $1,000-par-value that matures in one year. What is the bond's yield to maturity rate?
Group of answer choices
A. 10%
B. 14%
C. 11%
D. 12%
Expert Solution
Yield to maturity = (Future value / initia value)^1/periods - 1
Yield to maturity = (1000 / 909.09)^1/1 - 1
Yield to maturity = (1.1)^1/1 - 1
Yield to maturity = 1.1 - 1
Yield to maturity = 0.1 or 10%
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