34) A zero-coupon bond with a 15-year maturity and a face value of $1,000 is sold...
34) A zero-coupon bond with a 15-year maturity and a face value of $1,000 is sold at $123. What is the bond's yield to maturity?
A. about 15%
B. about 18%
C. about 25%
D. about 26%
E. about 27%
Homework Answers
Current value=Face value/(1+YTM)^time period
123=1000/(1+YTM)^15
(1+YTM)^15=(1000/123)
1+YTM=(1000/123)^(1/15)
YTM=1.15-1
=15%(Approx).
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