Question: a 10 year zero coupon bond with a yield to maturity of 5% has a face value of $1000. An investor purchases this bond when

a 10 year zero coupon bond with a yield to maturity of 5% has a face value of $1000. An investor purchases this bond when it is initially traded, and then sells it five years later. What is the rate of return of this investment, assuming the yield to maturity does not change? Answers say 4.01% can someone please explain this and show their working? Thank you.

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock blur-text-image

Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock

Step: 3 Unlock

Students Have Also Explored These Related Finance Questions!

The building slab is subjected to four parallel column loadings. Determine the equivalent resultant force and specify its location (x, y) on the slab. Take F1 = 30 kN, F2 = 40kN. 50 kN 20 kN 4 m 8m 2...

10 year zero coupon bond with a yield to maturity of 5.4% as a face value of $1000 investor purchase Le Bon when it is initially traded in sales at four years later, what is an annual rate of the...

#111 A ten - year, zero - coupon bond with a yield to maturity of 6.4% has a face value of $1,000. An investor purchases the bond when it is initially traded, and then sells it four years later. What...

A newly issued, ten year, zero coupon bond with a yield to maturity of 3.80% has a face value of $1000. An investor purchases the bond when it is initially traded, and then sells it four years later....

A ten - year, zero - coupon bond with a yield to maturity of 5 . 2 % has a face value of $ 5 , 0 0 0 . An investor purchases the of return of this investment, assuming the yield to maturity does not...

Question 18 of 22 This test: 22 point(s) possible This question: 1 point(s) possible Submit test A ten-year, zero - coupon bond with a yield to maturity of 8.6% has a face value of $5,000. An...

A one year zero coupon bond has a yield to maturity of 5%, a two year zero coupon bond has a yield to maturity of 6%, and a three year zero coupon bond has a yield to maturity of 7%. Assume that the...

Please show all your work and steps! Thank you! 2. A one year zero coupon bond has a yield to maturity of 5%, a two year zero coupon bond has a yield to maturity of 6%, and a three year zero coupon...

Need This Done Very Soon A one year zero coupon bond has a yield to maturity of 5%, a two year zero couponbond has a yield to maturity of 6%, and a three year zero coupon bond has a yield tomaturity...

plaase help! Questions # 6-9 6. Suppose you buy a 10 year zero coupon annual bond with yield to maturity of 4% and a face value of $100. If you hold the bond for 4 years and then decide to sell it to...

MULTIPLE CHOICE 5.Which of the following is true regarding the risk-free interest rate? (a) It is the interest rate paid on US government bonds (b) It does not carry any default risk (risk of...

What is an example of a fraud that occurred on a company that has an audit department? What controls were circumvented? How was the fraud detected? 2. What things are most interesting or concerning...

How does the efficient set change when the condition of borrowing and lending at the same riskfree rate is changed to borrowing at a rate greater than the rate at which riskfree lending can be...

When the annuity payment is made at the start of the period this is referred to as: Multiple choice question. deferred annuity general annuity annuity due annuity in arrears

On 1 March 2007 DB Limited issued R560 000 15% debentures at R98. The debentures were to be redeemed at par in four equal annual payments starting 28 February 2010. Required: Journalise the above...