Question

you purchased a bond at a price of 3,600. In 25 years when the bond matures, the bond will be worth $25,000. it is exactly 21 years after you purchased the bond and you can sell the bond today for $16,825. If you hold the bond until it matures what annual rate of return will you earn from today?

Answer 1

Hello Sir/ Mam

YOUR REQUIRED ANSWER IS 10.41%

Given that:

Current Price = $16,825

FV = $25,000

n = 4

Using excel function, "=RATE(4,0,-16825,25000,0)", we get Rate = 10.41%

I hope this solves your doubt.

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