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Zero coupon bonds: Rockinghouse Ltd plans to issue seven-year zero coupon bonds. It has learned that...

Zero coupon bonds: Rockinghouse Ltd plans to issue seven-year zero coupon bonds. It has learned that these bonds will sell today at a price of $414.42. Face value of bonds - $1000. Yield to maturity on these bonds is ____%

(Round your answer to 2 decimal places. All intermittent calculations should be rounded to 4 decimal places before carrying to next calculation.)

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Answer #1

Price = FV / (1 + r)n

414.42 = 1000 / (1 + r)7

(1 + r)7 = 2.4130

1 + r = 1.1341

r = 0.1341 or 13.41%

Yield to maturity is 13.41%

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