Question

You purchased a zero-coupon bond one year ago for $281.33. The market interest rate is now 7 percent....

You purchased a zero-coupon bond one year ago for $281.33. The market interest rate is now 7 percent.

Required:

If the bond had 19 years to maturity when you originally purchased it, what was your total return for the past year? (Do not round intermediate calculations. Enter your answer as a percentage rounded to 2 decimal places (e.g., 32.16).)

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Answer #1

As the bond is a zero coupon bond , no interest is receivable in its lifetime. Only the par value will be received at maturity.

So there will be no interest return in from the bond in the last year.

The market value last year was $281.33, in one year the maturity value will be increased by the effective yield % which is not given for the bond.

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