Question

What is the yield to maturity of a​ one-year, risk-free,​ zero-coupon bond with a $ 10 comma 000 face value and a price of $ 9 comma 800 when​ released?

Answer 1

2.04%

Step-by-step explanation:

yield to maturity of a zero coupon bond = (face value / market value)¹/ⁿ - 1

YTM = ($10,000 / $9,800)¹/¹ - 1 = 0.0204 = 2.04%

The yield to maturity is the expected return (yield) that a bondholder should receive after holding the bond until maturity. Generally risk free bonds have a very low YTM, and as risk increases, so does the bond's yield.