What is the rate of return for an investor who purchased $1,054.47 for a five-year bond...
What is the rate of return for an investor who purchased $1,054.47 for a five-year bond with a 7% coupon and sells the bond one year later for $1,040.67?
A) 5.00%
B) 5.33%
C) 6.40%
D) 7.00%
Homework Answers
B) 5.33%
| Rate of return | = | (C+(P1-P0))/P0 | Where, | ||||
| = | (70+(1040.67-1054.47))/1054.47 | C | = | $ 70.00 | |||
| = | 5.33% | P0 | = | $ -1,054.47 | |||
| P1 | = | $ 1,040.67 | |||||
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