Question

There is a zero coupon bond currently priced at $521.58. This bond has a par value of $1000 and matures in 9 years. What is the yield to maturity of this bond

Answer 1

7.5%

Explanation:

The computation of yield to maturity is shown below:-

Let YTM be i%.

As we know that

Present Value = Face Value ÷ (1 + i)^n

$521.58 = $1,000 ÷ (1 + i)^9

(1 + i)^9 = 1.91725

1 + i = 1.075

i = 7.5%

Therefore for computing the yield to maturity we simply applied the above formula and for more clarification, we have attached the spreadsheet.