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Finance 200

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. 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)?

  • Finance 200 -

    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

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