Determine the annual rate of return on a 15-year, $200,000 discount bond that you originally purchased...

Determine the annual rate of return on a 15-year, $200,000 discount bond that you originally purchased for $54,500 and sold 6 years later for $80,500.

Expert Solution

Annual rate of return = (Future value / initial value)^1/n - 1

Annual rate of return = (80500 / 54500)^1/6 - 1

Annual rate of return = (1.47706)^1/6 - 1

Annual rate of return = 1.0672 - 1

Annual rate of return = 0.0672 or 6.72%

jeff jeffy answered 2 years ago

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