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Calculate returns problem

Business & Finance
Tutor: None Selected Time limit: 0 Hours

You purchased a zero-coupon bond one year ago for $283.33. The market interest rate is now 9 percent. If the bond had 15 years to maturity when you originally purchased it, what was your total return for the past year? Total return for the past year?

Dec 6th, 2014

Assuming that par is $1,000...it is the difference between the original price and the PV at 9% with 14 years 

remaining, divided by the original price: 

PV = 1,000/ 1.09^14 = $299.25 

299.25 - 283.83 = 15.42 

15.42 / 283.83 = 0.05433 or 5.43%

Dec 6th, 2014

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