Answered

Explore Westonci.ca, the leading Q&A site where experts provide accurate and helpful answers to all your questions. Join our platform to connect with experts ready to provide detailed answers to your questions in various areas. Discover detailed answers to your questions from a wide network of experts on our comprehensive Q&A platform.

You buy a 12-year 10% annual coupon bond at par value, $1,000. You sell the bond 3 years later for $1,100. What is your total rate of return over this 3-year period?

Sagot :

Tundexi

Answer:

40%

Explanation:

Coupon per year = Face Value * Coupon Rate

Coupon per year = $1,000 * 10%

Coupon per year = $1,000 * 0.10

Coupon per year = $100

Total Coupon in 3 years = Coupon per year * 3 years

Total Coupon in 3 years = $100 * 3 years

Total Coupon in 3 years = $300

Rate of return = [(Selling Price - Face Value) + Coupon Received] / Face Value*100

Rate of return = [[($1,100 - $1,000) + $300] / 1000] *100

Rate of return = [[$100 + $300] / $1000] * 100

Rate of return = $400 / $1000 * 100

Rate of return = 0.40

Rate of return = 40%

Visit us again for up-to-date and reliable answers. We're always ready to assist you with your informational needs. We hope our answers were useful. Return anytime for more information and answers to any other questions you have. Westonci.ca is committed to providing accurate answers. Come back soon for more trustworthy information.