A Local Brokerage Firm Is Offering a Zero-Coupon Certificate of Deposit

question 160

Multiple Choice

A local brokerage firm is offering a zero-coupon certificate of deposit for $10,000. At maturity, three years from now, the investor will receive $14,000. What is the rate of return on this investment?

• A) 14 percent
• B) 13 percent
• C) 12 percent
• D) 11 percent

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Definitions:

Journal Entries

Records of financial transactions in the chronological order by which they occur, entered in the accounting records.

Accounting Problems

Challenges or difficulties encountered in the process of recording, classifying, summarizing, and interpreting financial transactions and events.

Promissory Note

A monetary instrument featuring a formal pledge from one entity to another to pay a specified amount of money, which can be either upon request or on a predetermined future date.

Personal Bankruptcy

A legal process by which individuals unable to meet their debt obligations can obtain relief from some or all of their debts.