📖 The story
Mrs. Brent bought a zero-coupon bond at a price of 60 and sells it after 4 years at a risen price of 82. What annual return did she achieve?
ℹ No ongoing payments, pure price view.
Topics › Bonds & Zero-Coupon Bonds › Return on an early sale
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Bonds & Zero-Coupon Bonds
Return on an early sale
Change any number and press "Calculate" – or use "Type in" on the right to watch it entered step by step.
What you learn
Bond prices fluctuate with the interest-rate environment. If you sell before maturity at a risen price, the realized return can lie above the original issue yield – timing matters.
In short: If the price rises before maturity, the realized return can lie above the original issue yield.
Formula
i = (FV/K0)^(1/n) − 1
With the example numbers
i = (82/60)1/4 − 1 = 8.12 %
How to read the formula
Extracting the return from the starting and ending value means taking the n-th root of the ratio: i = (FV/K₀)^(1/n) − 1. The root spreads the total gain evenly across all years – that is the true average return, not the naive total gain divided by the years.
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