Question

If a united states bond can be purchased at $14.60 and has a maturity value at the end of 25 years of $100, what is the annual rate of return on the bond

Answer 1

First we have to subtract the beginning value ($14.60) FROM the ending value ($100). $100 - $14.60 = $85.40 We then have to divide the difference ($85.40) by our beginning value ($14.60). The resulting number will be the rate of return. $85.40/$14.60 = 5.849% The annual rate of return on the bond is approximately 5.8%