The US government issues a 1-year bond with a face value of $1,000 and a zero coupon. The market interest rate is 10 percent, what is the market price of the bond? If that bond price falls by 5 percent, what happens to its yield?
In a financial calculator, we input:
FV = 1000
payment = 0
interest rate = 10%
Number of years = ...
Find the yield to maturity in the case.