You can calculate the return on equity of any investment that consists of one cash inflow and outflow using the zero coupon bond approach. O True O False

False.

The statement provided is incorrect as it conflates two different financial concepts: Return on Equity (ROE) and the zero-coupon bond approach to calculating yield.

Return on Equity measures a corporation's profitability in relation to shareholders' equity. It is calculated by taking a company’s net income divided by the shareholders’ equity. ROE provides a sense of the efficiency with which a company is utilizing equity to generate profits, but it cannot be directly applied to any investment that consists solely of cash inflows and outflows.

The zero-coupon bond approach, on the other hand is a method to calculate the yield or the internal rate of return (IRR) on investments that do not produce intermediate cash flows – such as zero-coupon bonds. These types of bonds are sold at a discount and pay no interest over their lifetime; they only provide a single cash inflow at maturity, when the bond is redeemed for its full face value. The yield of a zero-coupon bond is a function of the purchase price, the face value, and the time to maturity.

While zero-coupon bonds and investments can indeed have an ROE associated with them if they are purchased or held by a company using equity capital, the method for calculating ROE is not comparable to the zero-coupon bond approach to calculate yield (or IRR).