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Approximately, what is the yield to maturity of a pure discount bond with 5 years maturity,...

Approximately, what is the yield to maturity of a pure discount bond with 5 years maturity, face value of $100 and price of $102.00. Assume annual compounding.

Group of answer choices

-1.961%

0.397%

-0.395%

0.906%

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Answer #1

Face Value of pure discount Bond = $100

Current price = $102

Calculating the Yield to Maturity(YTM) of a pure discount bond with 5 years maturity:-

where, n = no of years to maturity = 5

YTM = 0.996047 - 1

YTM = -0.395%

Option 3

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