I think the effective rate of return (or internal rate of return as per text books) can be calculated in excel like this: (I have taken an optimistic 7% return for 5 yrs and your logic of net investment of 67,000 rupees) period Regular bond Deep discount bond 0 -67000 -67000 1 7000 0 2 7000 0 3 7000 0 4 7000 0 5 107000 140255.1731
Rate of return 17% 16%
So the net return would be in the range of 15-20% and not astronomical 61%.
