Zero coupon bond value = Maturity value / (1 + r) to the power of the number of years x 2
614 = 1,000 / (1 + r)^20
1,000 / 614 = (1 + r)^20
1.62866 = (1 + r)^20
1.62866^1/20 = 1 + r
1.02469 = 1 + r
0.02469 = r
since r is the semi-annual discount rate, double to get the Bond Equivalent Yield: 0.02469 * 2 = 0.04938, or 4.938%
if you say so hoe
What is the market yield-to-maturity (YTM) of a Zero Coupon Bond that pays $1,000 face at maturity in
10 years from now? The current market price of this bond is $614. (use annual discounting ,fin. calculator
or approximate YTM formula)
