You are considering investing in a zero-coupon bond that will pay you its face value of...
You are considering investing in a zero-coupon bond that will pay you its face value of $1,000 in twelve years. If the bond is currently selling for $444.01, then the internal rate of return (IRR) for investing in this bond is closest to:
A.6.0%
B.8.1%
C.9.2%
D.7.0%
Homework Answers
IRR is calculated by using outflow = Inflow
444.01=1000/(1+r)12
(1+r)12 = 1000/444.01
r = 7%
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