a. Assuming you purchased a $50 face value bond, what is the exact rate of return you would earn if you held the bond for 20 years until it doubled in value? b. If you purchased a $50 face value bond in 2019 at the then current interest rate of .10 percent per year, how much would the bond be worth in 2029? c. In 2029, instead of cashing the bond in for its then current value, you decide to hold the bond until it doubles in face value in 2039. What rate of return will you earn over the last 10 years?
a. Assuming you purchased a $50 face value bond, what is the exact rate of return you would earn if you held the bond for 20 years until it doubled in value? b. If you purchased a $50 face value bond in 2019 at the then current interest rate of .10 percent per year, how much would the bond be worth in 2029? c. In 2029, instead of cashing the bond in for its then current value, you decide to hold the bond until it doubles in face value in 2039. What rate of return will you earn over the last 10 years?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:2
Refer back to the Series EE savings bonds we discussed at the very beginning
of the chapter.
a. Assuming you purchased a $50 face value bond, what is the exact rate of
return you would earn if you held the bond for 20 years until it doubled in
value?
b. If you purchased a $50 face value bond in 2019 at the then current interest
rate of .10 percent per year, how much would the bond be worth in 2029?
c. In 2029, instead of cashing the bond in for its then current value, you decide
to hold the bond until it doubles in face value in 2039. What rate of return will
you earn over the last 10 years?
Input area:
a. Original value
Number of years
Future value
b. Interest rate
Number of years
c. Number of years
Output area:
$50
a. Rate of return
b. Future value
C. Rate of return
20
(Use cells A6 to C11 from the given information to complete this question.
Your answer for part b should be a positive value.)
$100
0.10%
10
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