Question

A one-year zero coupon bond costs \$99.43$99.43 today. Exactly one year from today, it will pay \$100$100. What is the annual yield-to-maturity of the bond? (I.e., what is the discount rate one needs to use to get the price of the bond given the future cash flow of \$100$100 in one year?) *Make sure to input all percentage answers as numeric values without symbols, and use four decimal places of precision. For example, if the answer is 6%, then enter 0.0600.

Answer 1

Answer:

0.00573

Explanation:

Cost of the bond today = $99.43

Value of bond at end of year = $100

Difference = $100 - $99.43 = $0.57

This $0.57 represents earnings on such bond value, that is yield on the bond.

Thus, yearly yield = $0.57/$99.43 = 0.00573

This value represents the discount rate of 1 year on $100 that is for which present value $99.43.

Final Answer

0.00573

Answer 2

The discount rate a person needs to use to get the bond price when considering future cash flows in one year that is the yearly yield to maturity is 0.00573.

What do you mean by yield at maturity?

The yield at maturity is considered to be a long-term bond yield but is expressed as an annual value.

The Cost of the bond today is $99.43

The value of bond at end of the year is $100

Difference will be $100 - $99.43 = $0.57

This $0.57 represents earnings on such bond value, that is yield on the bond.

Yearly yield is $0.57/$99.43 = 0.00573

Thus, this value represents the discount rate of 1 year on $100 which is for which present value of $99.43.

To learn more about yield to maturity, refer:

https://brainly.com/question/26376004