Question

You purchased a bond at a price of $13,100. In 15 years when the bond matures, the bond will be worth $30,000. It is exactly 7 years after you purchased the bond and you can sell the bond today for $21,300. If you hold the bond until it matures, what annual rate of return will you earn from today?

rev: 01_29_202

Answer 1

- Price of Bond today(rate at which it can be sold) = $21,300

Maturity Value of Bond = $30,000

No of years to maturity from today(n) = 15 years - 7 years = 8 years

Calculating the Annual rate of Return from today:-

Annual rate of Return from today

Annual rate of Return from today = 1.04374 - 1

Annual rate of Return from today = 4.37%

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