We need to calculate the yield to maturity (YTM) of a 5-year zero-coupon bond with a face value of $1000 and a current price of $735.67.

1. Problem Description

We need to calculate the yield to maturity (YTM) of a 5-year zero-coupon bond with a face value of $1000 and a current price of$735.

6

7.

2. Solution Steps

The formula for the yield to maturity of a zero-coupon bond is:

$YTM = (Face Value / Current Price)^{(1 / Years)} - 1$

In this case:

Face Value = $1000

Current Price = $735.67

Years = 5

$YTM = (1000 / 735.67)^{(1 / 5)} - 1$

$YTM = (1.3592)^{(0.2)} - 1$

$YTM = 1.0633 - 1$

$YTM = 0.0633$

Convert to percentage:

$YTM = 0.0633 * 100 = 6.33\%$

3. Final Answer

B. 6.33%