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What is the expected rate of return of the following bonds?       Par value: $1,000      ...

What is the expected rate of return of the following bonds?

      Par value: $1,000

      Years to maturity: 10 years

      Coupon rate: 8% paid semiannually

      Current market price: $960

Select one:

a. 8.22%

b. 8.61%*

c. 9%

d. 9.43%

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Answer #1

Expected rate of return is calculated using the RATE function as follows:-

=RATE(nper,pmt,pv,fv)

=RATE(10*2,8%/2*1000,-960,1000)*2

=8.61%

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