Mathematics · Interest and Bonds
A pension fund manager is analyzing a 20-year zero-coupon bond issued by the government with a face value of 1,00,000. The bond is currently being offered at a price of 21,450. The manager needs to ensure that this bond will provide an annualized return of at least 7.5% to meet the fund's future pension liabilities. Determine the approximate annual yield to maturity (YTM) of the 20-year bond and state if it meets the fund's 7.5% requirement.
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 16.90% and it fails the requirement.
- 27.85% and it meets the requirement.
- 37.20% and it fails the requirement.
- 48.00% and it meets the requirement.✓
Correct answer
8.00% and it meets the requirement.
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