I read an article this morning about a million dollar bet Warren Buffett made with a hedge fund that would take 10 years to determine the outcome. They didn't each put down a million dollars, rather, they put down a certain amount of dollars that would accrue to at least 1 million dollars after 10 years. The following is an extract from the article:
Originally, the stake was simply $1 million, an amount that Protege and Buffett guaranteed by each putting up $320,000 in cash that was invested in zero-coupon bonds structured to ascend gradually over the bet's 10 years to a value of $1 million.
My question is how did they get on average a 20% return each year from zero-coupon bonds? It seems too good to be true and I'm just wondering if such opportunities exist for the common investor, both back in 2008 when the bet was made, and today.