suppose you paid 1085.50 for a 1000 par value bond with a 5% annual coupon rate...

suppose you paid 1085.50 for a 1000 par value bond with a 5% annual coupon rate that matures in 10 years if you hold the bond for 1 year and sell it for 1055.90 what is your one year return

Expert Solution

1 year return = (sale price - purchase price + coupon payment) / purchase price

coupon payment = par value * coupon rate = $1,000 * 5% = $50

1 year return = ($1,055.90 - $1,085.50 + $50) / $1,085.50

1 year return = 1.88%

jeff jeffy answered 2 years ago

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