Loading…
SIDC PrepStudyingModule 6
Switch exam
Investment advice and corporate finance
Module 12Investment Management and Corporate FinanceA five-year zero-coupon bond trades at RM82.19 per RM100 face value. What is its yield to maturity (annual compounding)?
With no coupons, the yield solves 82.19 × (1 + y)⁵ = 100, so y = (100 ÷ 82.19)^(1/5) − 1 = 1.2167^0.2 − 1 = 4.00%. Dividing the total gain by price and then by five, 17.81 ÷ 82.19 ÷ 5 = 4.33%, is simple interest and ignores compounding. Dividing the gain by face value, 17.81 ÷ 100 ÷ 5 = 3.56%, uses the wrong base. The 21.67% total gain over five years is not an annual yield. Source: SIDC M7 Study Outline Topic 4 Section B.4 Determining the Yield (IRR) and B.7 Calculating Bond Yield; CFA Institute Level I, 'Fixed-Income Bond Valuation: Prices and Yields' (as at October 2026).
Annualising with simple interest. A zero's yield is the compound rate that grows the price into the face value.
Practise more Module 7 Fixed income and money markets questions
Exam-style questions with worked answers, then full timed mocks. Free to start.
Build a daily practice habit — a few exam-style questions a day, with worked answers. Free to start.
Start practising →Original study material mapped to the public SIDC Module 7 syllabus. Unofficial, not endorsed by SIDC or the SC. Verify figures and rules against current guidance before relying on them.