When you stuff dollar bills under your mattress, knowing that they will be there next year to help buy your next major purchase,
1 answer:
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Answer:
YTM = 8%
Explanation:
$100 per year up to 4 years means, each year, the FV = $100.
We know, Zero coupon bond = [Fair Value ÷ ]
As the 4-year annuity paying the different YTM in the previous three years, 4th year YTM will be -
Bond value = +
+
+
or, $334.57 = $94.3396 + $87.3439 + $79.3832 +
or, $334.57 - 261.0667 =
or, = ($100 ÷ $73.50)
or, 1 + YTM =
or, YTM = 1.08 - 1
YTM = 0.08 or 8%