Suppose you pay $9800 for a $10 000 par Treasury bond maturing in two months. What is the annual percentage rate of return for this investment?

Question

Quizplus · Accepted Answer

To calculate the annual percentage rate of return, we need to use the following formula:

(APR) = [(Par value - Purchase price) / Purchase price] x [(365 / Number of days to maturity)]

Substituting the given values, we get:

(APR) = [(10,000 - 9,800) / 9,800] x [(365 / 60)]

(APR) = 0.0204 x 6.083

(APR) = 0.124 or 12.24%

Therefore, the annual percentage rate of return for this investment is 12.24%. Option C is the correct answer.

Suppose You Pay $9800 for a $10 000 Par Treasury