Question
A zero-coupon bond with face value $$\$ 1,000$$ and maturity of five years sells for $$\$ 746.22$$. What is its yield to maturity? What will happen to its yield to maturity if its price falls immediately to $$\$ 730$$ ?
Step 1
YTM is considered a long-term bond yield expressed as an annual rate. In the case of a zero-coupon bond, the YTM would represent the annualized return on the investment, since there are no periodic interest payments - the bond is purchased at a discount and the Show more…
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