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If you paid $935 for a $1000, 30 year, 12% coupon bond paying semiannual interest with...

  1. If you paid $935 for a $1000, 30 year, 12% coupon bond paying semiannual interest with 10 years left to maturity, what would be your rate of return for the remaining life of the bond?

    A.

    15.2%
    B.

    14.7%
    C.

    13.2%
    D.

    12%
    E.

    cannot be determined
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Answer #1

Using excel RATE function

rate of return

= RATE(number_of_periods, payment_per_period, present_value, [future_value], [end_or_beginning], [rate_guess]) * number of compounds

= RATE(20,120/2,-935,1000)*2

= 13.19%

= 13.2%

hence choose C)

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