Asked by Stacy
. If you purchase a zero coupon bond today for $225 and it matures at $1,000 in 11 years, what rate of return will you earn on that bond (to the nearest 10th of 1 percent)?
Answers
Answered by
economyst
Excel spreadsheets are very helpful for these types of problems.
225*(1+r)^11 = 1000.
solve for r
(1+r)^11 = 1000/225 = 4.444
Raise 4.444 to the (1/11) power
I get r=.145
225*(1+r)^11 = 1000.
solve for r
(1+r)^11 = 1000/225 = 4.444
Raise 4.444 to the (1/11) power
I get r=.145
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