Question

A risk free coupon bond with a $10,000 face value has 15 years

to maturity. The bond currently trades at $8020. what is the yield
to maturity of this bond?
A risk-free, zero-coupon bond with a $10,000 face value has 15 years to maturity. The bond currently trades at $8,020. What is the yield to maturity of this bond? OA. 59.9% OB 1.482% OC. 0.741% OD. 80

Answer 1

The yield to maturity (YTM) of a bond is the internal rate of return earned by an investor who buys the bond today at the market price, assuming that the bond will be held until maturity and all coupon and principal payments will be made on schedule.

In this case, the bond is a zero-coupon bond, meaning it does not pay periodic interest. Instead, it is sold at a discount to its face value and matures at its face value. The YTM can be calculated using the formula:

Solving for YTM, we get **0.01482**, or **1.482%**. So the correct answer is OB.