Question

Three zero-coupon bonds with face value of $10,000 are currently selling for the following amounts:

Bond Years to Maturity Price

A 1 $9750

B 2 $9400

C 3 $8900

Calculate the yield to maturity for each of the three bonds.

Answer 1

Sield to 1 = Coupon Maturity Interest + F-P OD el dit p.) Coupon Interest Face Value could Bond price of number of years left to Maturity P = a n

F = $ 10,000 o = 1 9750 - 1 year Yield to Maturity - $0+ $10000-89750 1510.000 + $ 9750) $250 $9875 0.025 = or 2.5 %. F = $ 10000 P - $ 940o inda n = 2 years

Sield - 10 to Maturity = + ($10000-$9400) - $ 10000 + $ 9400) - tot 8300 $ 9700 - 0.0309 or 3.09 % ( - со F = 1 10000 P = 88900 л - Загоц Lield to Maturity = fo+ (010000 - $8900) 28400 - (Clopoot 18900 $366-67 - 19450 = 0.0388 or 3.88%