If a Canada Savings bond can be purchased for $29.50 and has a maturity value at the end of 25 years of $100, what is the annual rate of return on the bond?

Question

Quizplus · Accepted Answer

To calculate the annual rate of return on the bond, we need to use the formula:
Annual rate of return = (Maturity value / Purchase price) ^ (1/years) - 1
Plugging in the numbers, we get:
Annual rate of return = ($100 / $29.50) ^ (1/25) - 1
Annual rate of return = 0.0503 or 5.03%
Therefore, the best choice is B, as it is the closest option to the calculated rate of return.

If a Canada Savings Bond Can Be Purchased for $29