A creditor provides a company with $100,000 cash by purchasing bonds at the end of Year...
A creditor provides a company with $100,000 cash by purchasing
bonds at the end of Year 1. The creditor receives $6,000 in
interest from the company during Year 2. The creditor sells the
bonds at the end of Year 2 or $102,000. What was the rate of return
generated by this investment? (Round the percentage to the
nearest whole number.)
Homework Answers
Ans:
Rate of return =(Interest or dividend+ appreciation(difference sales price and cost))/ Initial investment
|
Rate of return |
= |
(C+(P1-P0))/P0 |
Where, |
|||
|
= |
(6000+(102000-100000))/100000 |
C |
= |
$ 6,000 |
||
|
= |
8% |
P0 |
= |
$ 1,00,000 |
||
|
P1 |
= |
$ 1,02,000 |
||||
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