Let's say you have the option to invest in one of the following:

a. A zero coupon bond that costs $513.60 today pays nothing over its lifetime and pays out $1,000 5 years later.

b. A bond that costs $1,000 today, pays interest of $113 every six months, and is repaid at the end of five years with a face value of $1,000. 

Which bond offers higher yields? 

(Show calculations)

Answer rating: 100% (QA)

Bond A Cost 51360 Payout 1000 in 5 years Yield Payout Cost Cost 100 1000 51360 51360 10... View the full answer