Asked by C.J.
A zero-coupon bond matures for $1,000 in exactly 12 years' time. If you paid $385.63 today for the bond, what average yearly rate of return will you earn?
Answers
Answered by
Anonymous
I don't think I am right, but $83.33 or 32.13 I am b=not sure
Answered by
MathMate
Let r=interest rate
385.63*(1+r)<sup>12</sup>=1000
(1+r)<sup>12</sup> = 1000/385.63 = 2.5932
Solve for 1+r and calculate r as the interest rate.
Quick check:
Rule of 72 says that money invested at r% will double in 72/r years (approximately).
Since the investment has more than doubled in 12 years, the interest rate should be <i>more</i> than 72/12=6%.
In fact, it is over 8%.
Post your results if you want to check.
There are no AI answers yet. The ability to request AI answers is coming soon!
Submit Your Answer
We prioritize human answers over AI answers.
If you are human, and you can answer this question, please submit your answer.