Suppose a zero-coupon bond is selling for $614.00 today. It promises to pay $1,000 in exactly 10 years with annual compounding. Its annual rate of return would be about

Answer 1

1000=614(1+i)^10

1000/614=(1+i)^10
taking log of each side
.2188= 10 log(1+i)
.02188=log(1+i)
1-i= 10^ .2188=1.05167

i= 5.167percent

Double check all that, it is slightly off