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If you pay $8,450 for a 20-year zero coupon bond with a face value of $41,000, what is your annual compound rate of return? A

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Answer #1

Annual compound rate = (Future value / initial investment)1/n - 1

Annual compound rate = (41,000 / 8,450)1/20 - 1

Annual compound rate = (4.852071)1/20 - 1

Annual compound rate = 1.0822 - 1

Annual compound rate = 0.0822 or 8.22%

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