Asked by Steve
What is the rate of return on a $10,000 bond purchased at $8,750 with a 10% coupon?
The 10% coupon guarantees a return of $1,000 on the nominal value of the bond, which is $10,000. The bond's actual sale price was $8,750, so the $1,000 coupon must be figured as a percent of $8,750. 1000 / 8750 = 11.43%
My answer is 11.43%
The 10% coupon guarantees a return of $1,000 on the nominal value of the bond, which is $10,000. The bond's actual sale price was $8,750, so the $1,000 coupon must be figured as a percent of $8,750. 1000 / 8750 = 11.43%
My answer is 11.43%
Answers
Answered by
Reiny
Even though you don't say, I will assume the time was 1 year.
so look at this way:
you started with 8750 and at the end of the year you had 10,000+ 1,000 or 11,000
8750(1+r) = 11000
1+r = 1.25714..
r = .25714 or 25.71%
so look at this way:
you started with 8750 and at the end of the year you had 10,000+ 1,000 or 11,000
8750(1+r) = 11000
1+r = 1.25714..
r = .25714 or 25.71%
Answered by
Darling
OP is right, it IS 11.43%
Answered by
Hiro
Darling....DARLING I found you!!! -Hiro
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