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Maturity (years) Price 2.83% 1 $97.25 5.79% 2 $94.53 3 $91.83 4 $89.23 The above table shows the price per $100-face value bond of several risk-free, zero-coupon bonds. What is the yield to maturity of the four-year, zero- coupon, risk-free bond shown? 5 $87.53

Maturity (years) Price 2.83% 1 $97.25 5.79% 2 $94.53 3 $91.83 4 $89.23 The above table shows the price per $100-face value bond of several risk-free, zero-coupon bonds. What is the yield to maturity of the four-year, zero- coupon, risk-free bond shown? 5 $87.53

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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The table provided illustrates the price per $100-face value bond for different maturities of several risk-free, zero-coupon bonds: | Maturity (years) | 1 | 2 | 3 | 4 | 5 | |------------------|----|----|----|----|----| | **Price** | $97.25 | $94.53 | $91.83 | $89.23 | $87.53 | This table shows how the bond prices decrease as maturity increases. These are risk-free, zero-coupon bonds, meaning they do not pay periodic interest, and they are presumed to have no risk of default. The question posed is: What is the yield to maturity of the four-year, zero-coupon, risk-free bond shown? The possible answers given are: - 2.83% - 5.79% - 2.85% (selected answer) - 12.07% - 2.89% The yield to maturity (YTM) is a measure of the annual return an investor can expect to earn if the bond is held until it matures. The selected answer here is 2.85%.
Transcribed Image Text:The table provided illustrates the price per $100-face value bond for different maturities of several risk-free, zero-coupon bonds: | Maturity (years) | 1 | 2 | 3 | 4 | 5 | |------------------|----|----|----|----|----| | **Price** | $97.25 | $94.53 | $91.83 | $89.23 | $87.53 | This table shows how the bond prices decrease as maturity increases. These are risk-free, zero-coupon bonds, meaning they do not pay periodic interest, and they are presumed to have no risk of default. The question posed is: What is the yield to maturity of the four-year, zero-coupon, risk-free bond shown? The possible answers given are: - 2.83% - 5.79% - 2.85% (selected answer) - 12.07% - 2.89% The yield to maturity (YTM) is a measure of the annual return an investor can expect to earn if the bond is held until it matures. The selected answer here is 2.85%.
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