Question
In: Finance
Last year Janet purchased a $1,000 face value corporate bond with a 12% annual coupon rate...
Last year Janet purchased a $1,000 face value corporate bond with a 12% annual coupon rate and a 30-year maturity. At the time of the purchase, it had an expected yield to maturity of 12.32%. If Janet sold the bond today for $920.86, what rate of return would she have earned for the past year? Do not round intermediate calculations. Round your answer to two decimal places..
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Expert Solution
| Computation Of Bond Price at the time of purchased | |||
| a | Annual Coupon Amount | $ 120.00 | |
| b | Present Value Annuity Factor for (30 Years,12.32%) | 7.868183 | |
| c | Present Value Of Annual Interest (a*b) | $ 944.18 | |
| d | Redemption Value | $ 1,000.00 | |
| e | Present Value Of (30 Years,12.32%) | 0.03064 | |
| g | Present Value Of Redemption Amount (d*e) | $ 30.64 | |
| f | Bond price(c+g) | $ 974.82 | |
| Rate of return = (sale price - purchase price + dividend income)/ purchase price | |||
| =($920.86-974.82 +$120)/974.82 | |||
| =66.04/974.82 | |||
| =6.77% | |||
jeff jeffy answered 2 years agoRelated Solutions
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