Nathan bought a zero coupon bond in 2003 for $485.19.In 2013 he redeemed it for $1,000.His internal rate of return on this investment was

Question

Quizplus · Accepted Answer

The internal rate of return (IRR) is the rate at which the present value of future cash flows equals the initial investment. Here, the IRR can be calculated using the formula for compound interest: $1,000 = $485.19 * (1 + r)^10. Solving for r gives approximately 7.5%.

Nathan Bought a Zero Coupon Bond in 2003 for $485