You purchased a 10-year zero-coupon bond for $900, the day the bond was issued. After one...
You purchased a 10-year zero-coupon bond for $900, the day the bond was issued. After one year the bond price is $950. What is the yield to maturity (YTM) of the bond after one year? Please show work.
A) (1000/950)1/9 – 1
B) (1000/950)1/10 – 1
C) (950/900)1/9 – 1
D) (1000/900)1/10 – 1
E) (950/900)1/10 – 1
Homework Answers
Price of Zero Coupon Bond = Face Value/(1 + r)n
950 = 1,000/(1 + r)9
r = (1,000/950)1/9 - 1
Option A is correct
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