Final answer:
To find the annualized rates of return for zero-coupon Treasury bonds, apply the formula [(Face Value / Present Value)^(1/n)] - 1, adjusting for each bond's maturity period. You'll calculate separate rates for the half-year, one-year, and 25-year bonds using their respective current prices.
Step-by-step explanation:
You have been tasked with calculating the annualized rates of return for zero-coupon Treasury bonds with different time horizons. To determine these rates, you use the formula for the annualized rate of return, which is:
Annualized Rate of Return = [(Face Value / Present Value)^(1/n)] - 1
Where:
For the half-year bond priced at $96.67, the formula becomes:
Annualized Rate of Return = [(100 / 96.67)^(1/0.5)] - 1
For the one-year bond priced at $93.27, the formula is:
Annualized Rate of Return = [(100 / 93.27)^(1/1)] - 1
For the 25-year bond priced at $28.41, the calculation is:
Annualized Rate of Return = [(100 / 28.41)^(1/25)] - 1
After performing these calculations, you will have the annualized rates of return for each of the zero-coupon Treasury bonds.