Suppose the government decides to issue a new savings bond that is guaranteed t double in value if you hold it for 18 years. Assume you purchase a bond that costs $50. a. What is the exact rate of return you would earn if you held the bond for 18 years unt it doubled in value? (Do not round intermediate calculations and enter your answe as a percent rounded to 2 decimal places, e.g., 32.16.) b. If you purchased the bond for $50 in 2020 at the then current interest rate of .28 percent year, how much would the bond be worth in 2030? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) c. In 2030, instead of cashing in the bond for its then current value, you decide to hold the bond until it doubles in face value in 2038. What annual rate of return will you earn over the last 8 years? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
Suppose the government decides to issue a new savings bond that is guaranteed t double in value if you hold it for 18 years. Assume you purchase a bond that costs $50. a. What is the exact rate of return you would earn if you held the bond for 18 years unt it doubled in value? (Do not round intermediate calculations and enter your answe as a percent rounded to 2 decimal places, e.g., 32.16.) b. If you purchased the bond for $50 in 2020 at the then current interest rate of .28 percent year, how much would the bond be worth in 2030? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) c. In 2030, instead of cashing in the bond for its then current value, you decide to hold the bond until it doubles in face value in 2038. What annual rate of return will you earn over the last 8 years? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
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:Suppose the government decides to issue a new savings bond that is guaranteed to
double in value if you hold it for 18 years. Assume you purchase a bond that costs $50.
a. What is the exact rate of return you would earn if you held the bond for 18 years until
it doubled in value? (Do not round intermediate calculations and enter your answer
as a percent rounded to 2 decimal places, e.g., 32.16.)
b. If you purchased the bond for $50 in 2020 at the then current interest rate of .28
percent year, how much would the bond be worth in 2030? (Do not round
intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
c. In 2030, instead of cashing in the bond for its then current value, you decide to hold
the bond until it doubles in face value in 2038. What annual rate of return will you
earn over the last 8 years? (Do not round intermediate calculations and enter your
answer as a percent rounded to 2 decimal places, e.g., 32.16.)
a. Rate of return
b. Bond value
c. Rate of return
%
%
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