Posted by Destiney on .
Suppose a zerocoupon 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

BUS 401 
bobpursley,
1000=614(1+i)^10
1000/614=(1+i)^10
taking log of each side
.2188= 10 log(1+i)
.02188=log(1+i)
1i= 10^ .2188=1.05167
i= 5.167percent
Double check all that, it is slightly off