A local bank is offering a zero coupon certificate of deposit for $25,000. At maturity, three yearsfrom now, the investor will receive $32,000. What is the rate of return on this investment?

Question

Quizplus · Accepted Answer

The rate of return on this investment is 9 percent. This is because the investor will receive $32,000 at maturity, which is $7,000 more than the initial investment of $25,000. This represents a 9 percent return over the three-year period.

A Local Bank Is Offering a Zero Coupon Certificate of Deposit