Select your language

Suggested languages for you:
Log In Start studying!
Answers without the blur. Sign up and see all textbooks for free! Illustration


Essentials Of Investments
Found in: Page 329
Essentials Of Investments

Essentials Of Investments

Book edition 9th
Author(s) Zvi Bodie, Alex Kane, Alan Marcus, Alan J. Marcus
Pages 748 pages
ISBN 9780078034695

Answers without the blur.

Just sign up for free and you're in.


Short Answer

The stated yield to maturity and realized compound yield to maturity of a (default-free) zero-coupon bond will always be equal. Why?

A zero-coupon bond has the same values for YTM and realized compound yield because there is no reinvestment rate uncertainty.

See the step by step solution

Step by Step Solution


The bonds which do not pay interests but trade at a deep discount from their face value is known as zero coupon bond.

Explanation on compound yield to maturity on zero coupon bond

Zero coupon bonds provide no coupons for reinvestment. Therefore the final value of the coupon comes from the principal of the bond and is independent of the rate at which this could be reinvested. There is no reinvestment rate uncertainty with zeros.

Most popular questions for Business-studies Textbooks


Want to see more solutions like these?

Sign up for free to discover our expert answers
Get Started - It’s free

Recommended explanations on Business-studies Textbooks

94% of StudySmarter users get better grades.

Sign up for free
94% of StudySmarter users get better grades.