You Purchase a 30-Year,zero-Coupon Bond for a Price of $20

question 32

Multiple Choice

You purchase a 30-year,zero-coupon bond for a price of $20.The bond will pay back $100 after 30 years and make no interim payments.The annual compounded return (geometric average return) on this investment is:

• A)5.31%
• B)6.54%
• C)4.78%
• D)5.51%

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Definitions:

Compete

The act of entities or individuals striving against others for a common objective, such as market share or victory in a game.

Monopolistic Competition

A market structure in which many companies sell products that are substitutes for each other but not perfect substitutes, thus combining elements of monopoly and perfect competition.

Free Entry

A market condition where new firms can enter the industry without facing significant barriers, promoting competition.

Product Differentiation

The act of differentiating a product or service to make it appealing to a specific target audience.