Honey well international zero coupon bonds par value $1000 mature on April 21, 2012. Calculate the yield to maturity if an investor purchased one of these bonds on April 21, 2006, at a price of $650.
To calculate the yield to maturity (YTM) of a zero coupon bond, you will need the following information:
1. The bond's par value: $1000
2. The purchase price of the bond: $650
3. The number of years to maturity: 6 years
To calculate the yield to maturity, you can use the following formula:
YTM = (Face Value / Present Value)^(1/Number of Years) - 1
Let's plug in the values to calculate the yield to maturity:
YTM = ($1000 / $650)^(1/6) - 1
Now, let's solve this equation:
YTM = 1.5385 - 1
YTM = 0.5385
Therefore, the yield to maturity of the Honeywell International zero coupon bond, if an investor purchased it on April 21, 2006, at a price of $650, is approximately 53.85%.