A zero-coupon bond sells at 87 with a yield-to-maturity of 4.7%. Two years later it is priced at 94 to yield 6.28%. The bond equivalent true return is closest to: a. 3.91% b. 4.70% c. 6.28% d. 8.05%

c

A) if it’s asking for return on investment or (HPY )

A…((1.08)^.25)*2=3.91%

that’s correct…it’s just one of those q’s that trip you a bit.

Can you guys post how you solve this problem from the beginning. I’m lost. Where did you get the 8% and the ^.25 A…((1.08)^.25)*2=3.91%

use your calculator n = 2 year semi annual (4) fv = 94 pv = -87 solve for i * 2 because it’s BEY

Thanks… Man, I’ve solved a dozen problems like this. I just start to panic when I get to bond problems.

yeah, I usually don’t know where to start!!