2. 16.

Calculating rates of return [LO 5.3] Looking at zero coupon bonds discussed in the chapter:

1. Assuming you purchased a $50 face value bond for $25, what is the exact rate of return you would earn if you held the bond for 20 years until it doubled in value?

2. If you purchased a $50 face value bond in early 2017 at the then current interest rate of 0.10 per cent per year, how much would the bond be worth in 2027?