In: Finance
Suppose that you have just paid $1,000 for a 10% coupon bond that matures in 5 years. The face value of the bond is $1,000. You expect that in 1 year you will be able to sell the bond for $1,100. What is the expected rate of return of this investment?
A) 0%
B) 10%
C) more than 10%
D) not enough information to answer the question
% return on sale= (1100-1000)/1000=100/1000=10%
Since there is also a coupon payment of 10% hence total return is more than 10%
Option c is correct