Question

You buy a government bond for $128 and sell it for $155 one year later. What was your rate of return (interest rate) measured in percentage terms? Round to two decimal places. Do not enter a % sign.

Answer 1

21.09

Step-by-step explanation:

The rate of return or the rate of interest is computed as:

Rate of return = Selling price of bond - Purchase price of bond / Purchase price of bond × 100

where

Selling price of bond is $155

Purchase price of bond is $128

So, putting the values above as:

Rate of return = $155 - $128 / $128 × 100

Rate of return = $27 / $128 × 100

Rate of return = 0.2109 × 100

Rate of return = 21.09