Question

Atlantis Fisheries issues zero coupon bonds on the market at a price of $400 per bond. Each bond has a face value of $1,000 payable at maturity in 16 years. What is the yield to maturity for these bonds? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)

Answer 1

Face value=$1000
Present value=$400
Coupon payment=$0
Time period=16 years
We need to determine the yield to maturity.

A 1 Face value 1000 2 Present value -400 3 Payment 0 4 Time period 16 Yield to maturity= 5 5.89% Formula used: RATE(B4,B3,B2,B1) 6

As the present value is a cash outflow we have taken it as negative.

Answer: The yield to maturity is 5.89%