What is the yield to maturity (YTM) of a zero coupon bond with a face value of $1,000, current price of $800 and maturity of 7 years? Recall that the compounding interval is 6 months and the YTM, like all interest rates, is reported on an annualized basis.
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The zero coupon bond effective yield formula is used to calculate the periodic return for a ... one of these bonds at $500, which has a face value at maturity of $1,000. ... If the number of years is used for n, then the annual yield is calculated. Considering that multiple years are involved, calculating a rate that takes time value
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