Question

You purchase a 30-year, zero-coupon bond for a price of $25. The bond will pay back $100 after

Answer 1

Answer:

annual compounded return = 4.73 %

so correct option is D) 4.73%

Explanation:

given data

present value = $25

future value = $100

time = 30 year

to find out

annual compounded return

solution

we get here annual compounded return that is express as

annual compounded return = $(\frac{FV}{PR} )^{\frac{1}{t}} - 1$    ............1

here t is time period and FV is future value and PV is present value

so put here all value in equation 1 we get

annual compounded return = $(\frac{100}{25} )^{\frac{1}{30}} - 1$

annual compounded return = 0.047294

annual compounded return = 4.73 %

so correct option is D) 4.73%