Consider the Leverage Unlimited, Inc., zero coupon bonds of 2020. The bonds were issued in 2002 for

Question:

Consider the Leverage Unlimited, Inc., zero coupon bonds of 2020. The bonds were issued in 2002 for $100. Determine the yield-to-maturity (to the nearest of 1 percent) if the bonds are purchased at the •

a. Issue price in 2002. (Note: To avoid a fractional year holding period, assume that the issue and maturity dates are at the midpoint-July 1-of the respective years.)

b. Market price as of July 1, 2016, of $750.

c. Explain why the returns calculated in Parts a and b are different.

Coupon
A coupon or coupon payment is the annual interest rate paid on a bond, expressed as a percentage of the face value and paid from issue date until maturity. Coupons are usually referred to in terms of the coupon rate (the sum of coupons paid in a... Maturity
Maturity is the date on which the life of a transaction or financial instrument ends, after which it must either be renewed, or it will cease to exist. The term is commonly used for deposits, foreign exchange spot, and forward transactions, interest...