Question

You invested $874 in a zero -coupon bond. The bond was worth $1000 at the end of the year. What rate of return did you earn on this investment? Round your answer to the nearest tenth of a percent.          

14.4%

12.6%                                                         

16.8%

2.4%

Answer 1

Return on the investment = (Final value – Initial value)/ Initial value

                                         = ($ 1,000 - $ 874)/$ 874

                                         = $ 126/$ 874

                                         = 0.144165 or 14.4 %

Hence option “14.4 %” is correct answer.