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Subject:
Calculating Interest Rate
Category: Business and Money > Finance Asked by: guzmanr9-ga List Price: $2.00 |
Posted:
14 Feb 2006 11:59 PST
Expires: 16 Mar 2006 11:59 PST Question ID: 445745 |
A zero-coupon bond which will pay $1,000 in 10 years is selling today for $422.41. What annual interest rate does the bond offer? |
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There is no answer at this time. |
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Subject:
Re: Calculating Interest Rate
From: thither-ga on 14 Feb 2006 17:03 PST |
9% if I'm not mistaken. Have a good day. |
Subject:
Re: Calculating Interest Rate
From: guzmanr9-ga on 14 Feb 2006 18:10 PST |
Very short answer, did not elaborate or offer an analysis...I realize the payoff on this question is low, however, can pay more for a greater effort |
Subject:
Re: Calculating Interest Rate
From: myoarin-ga on 14 Feb 2006 18:18 PST |
Guzman9, A lot of your questions look like homework, which shouldn't be answered on G-A.) 9% pa is correct. |
Subject:
Re: Calculating Interest Rate
From: thither-ga on 14 Feb 2006 21:08 PST |
Comments are free; only researchers get paid for their answers. This is from the answer to a previous question of yours (Question ID: 445741) and is the formula which I used: "Hi guzmanr9-ga, Compounded interest follows a relatively straightforward formula: P(1+r)^t Where: P = Principal amount r = rate of return t = time elapsed" You know P, t and the final value so: 422.41(1+r)^10=1000. Solve for r. Have a good day. |
Subject:
Re: Calculating Interest Rate
From: nurbs297-ga on 16 Feb 2006 07:56 PST |
thither is completly right.. In a zero coupin bond .. you don't have coupon ( which might complicate your life) .. you are left with principal and the final return .. and all you have to do is use compound interest formulae. ( Only in case where you don't want the annual interest rate i.e not compounded annually will the formulae different.. ) |
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