Mountain Treks Inc. has issued ten-year zero-coupon bonds with a $1,000 face value. If the bonds are currently selling for $514.87, what is the yield to maturity?
A) 6.75%
B) 6.86%
C) 10.45%
D) This question cannot be answered because there is no coupon payment provided.
Answer: A
Explanation: A) Use the convention of assuming semiannual discounting.
MODE = END, P/Y = 2, C/Y = 2
INPUT 20 ? -514.87 0 1,000
KEY N I/Y PV PMT FV
CPT 6.75
Business
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