A zero-coupon bond is a bond that is sold for less than its face value (that is, it is discounted) and has no periodic interest payments. Instead, the bond is redeemed for its face value at maturity. Thus, in this sense, interest is paid at maturity. Suppose that a zero-coupon bond sells for $8,500 and can be redeemed in 20-years for its face value of $38,000. What is the annual compound rate of return? ..... Annual compound rate = % (Round to two decimal places as needed.)
A zero-coupon bond is a bond that is sold for less than its face value (that is, it is discounted) and has no periodic interest payments. Instead, the bond is redeemed for its face value at maturity. Thus, in this sense, interest is paid at maturity. Suppose that a zero-coupon bond sells for $8,500 and can be redeemed in 20-years for its face value of $38,000. What is the annual compound rate of return? ..... Annual compound rate = % (Round to two decimal places as needed.)
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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![A zero-coupon bond is a bond that is sold for less than its face value (that is, it is
discounted) and has no periodic interest payments. Instead, the bond is
redeemed for its face value at maturity. Thus, in this sense, interest is paid at
maturity. Suppose that a zero-coupon bond sells for $8,500 and can be
redeemed in 20-years for its face value of $38,000. What is the annual
compound rate of return?
Annual compound rate =
% (Round to two decimal places as needed.)](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F913b5f8f-a764-41de-aa79-1ce0e1349cf9%2F09b7e06f-73b0-44a4-b942-4b1e508a731d%2F8h9hkn6l_processed.png&w=3840&q=75)
Transcribed Image Text:A zero-coupon bond is a bond that is sold for less than its face value (that is, it is
discounted) and has no periodic interest payments. Instead, the bond is
redeemed for its face value at maturity. Thus, in this sense, interest is paid at
maturity. Suppose that a zero-coupon bond sells for $8,500 and can be
redeemed in 20-years for its face value of $38,000. What is the annual
compound rate of return?
Annual compound rate =
% (Round to two decimal places as needed.)
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