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what is the total return to an investor who buys a bond for $1,100 when the bond has a 9% annual coupon and 5 years until maturity, then sells the bond after 1 year for $1,085? a. 6.82% b. 7.64% c. 6.91% d. 9.00%

Sagot :

The correct answer is C. 6.91%.

To calculate the total return to an investor, we need to calculate the capital gain (or loss) plus the coupon payments received.

In this case, the investor purchased the bond for $1,100 and sold it for $1,085, so the capital gain (or loss) is -$15.

The investor also received 9% in coupon payments, which is $99 (9% of $1,100).

When we add the capital gain (or loss) and coupon payments together, we find the total return to be 6.91% ($99 + (-$15) / $1,100).

An investor is any individual or other entity (such as a business or mutual fund) who invests money with the hope of making a profit.

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