Return on an early sale

📖 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.

Change any number and press "Calculate" – or use "Type in" on the right to watch it entered.

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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