A one-year zero coupon bond costs $99.43 today.Exactly one year from today, it will pay $100.What is the annual yield-to-maturity of the bond?(1.e., what is the discount rate one needs to use toget the price of the bond given the future cash flowof $100 in one year?)1.00570.00572.0057-0.0057

It is pertinent to note that the current price of a bond is the present value of all the cash flows…

Answered: = annual yield-to-maturity

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= annual yield-to-maturity

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter6: Fixed-income Securities: Characteristics And Valuation

Section: Chapter Questions

Problem 8P

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Concept explainers

Stock Yields

The stock yield is otherwise known as the dividend yield. The dividend yield is an annual payment of the stock dividends to the holder of a firm’s stock. The dividend yield is a financial ratio to measure the value of dividend payout every year for the relative stock price. The yield of a stock is usually shown in a percentage that discloses the expected future earnings from stock depending on the current stock price in the future. Stock yield will change depending on the market fluctuations and in accordance with the market fluctuations, the dividends will be increased or decreased by the firm.

Question

A one-year zero coupon bond costs $99.43 today.
Exactly one year from today, it will pay $100.
What is the annual yield-to-maturity of the bond?
(1.e., what is the discount rate one needs to use to
get the price of the bond given the future cash flow
of $100 in one year?)
1.0057
0.0057
2.0057
-0.0057

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