A zero-coupon bond matures in one year. The price of the bond is $500, and it will pay $1,000 in one year's time. What is the rate of return on the bond?

Name: A zero-coupon bond matures in one year. The price of the bond is $500, and it will pay $1,000 in one year's time. What is the rate of return on the bond?
Brand: Quizplus
Rating: 4.7 (45 reviews)

Question

Quizplus · Accepted Answer

The rate of return is calculated as (Future Value - Present Value) / Present Value. Here, it is ($1,000 - $500) / $500 = 1 or 100%.

A Zero-Coupon Bond Matures in One Year