Question: Consider a zero coupon bond being sold in the primary market with the following characteristics: currently priced at $821.93 which has 5 years to maturity
Consider a zero coupon bond being sold in the primary market with the following characteristics: currently priced at $821.93 which has 5 years to maturity and a face value of $1,000 at maturity. a. What is the yield to maturity on the bond? b. After one year, the interest rate decreases 2%. If you decide to sell the bond then, what is your rate of return? Hint: A zero coupon bond is a bond that has no coupon. You only receive the face value at maturity.
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