Hello, I have the pieces but I need help putting them together.
Bond 2 is a zero coupon bond with a $1,000 maturity value, and n = 5 years; YTM = 5%. (The zero coupon bond has no coupon payments; only a $1,000 maturity payment paid at maturity at the end of year 5).
For the Zero Coupon Bond 2 above that has a $1,000 maturity value and 5 years to maturity, what will be your annual compound yield for your 5-year holding period if you hold the bond to maturity, receiving the $1,000 maturity value at the end of Year 5?
I know that the annual compound formula is ((FV/Bond Price)^(1/n)) - 1, but I am not sure how to proceed.
I have calculated the bond price as $784.52.
Thanks!