Suppose the government decides to issue a new savings bond that is guaranteed to double in value if you hold it for 16 years. Assume you purchase a bond that costs $25.

a.) What is the exact rate of return you would earn if you held the bond for 16 years until it doubled in value?

b.) If you purchased the bond for $25 in 2017 at the then current interest rate of .11 percent year, how much would the bond be worth in 2025?

c.) In 2025, instead of cashing in the bond for its then current value, you decide to hold the bond until it doubles in face value in 2033. What annual rate of return will you earn over the last 8 years?

a. Rate of return 4.42 % b. Value of bond C. Rate of return %