contestada

An investor buys a 10-year, 7% coupon bond for $1,050, holds it for 1 year, and then sells it for $1,040. What was the investor's rate of return?

Respuesta :

ogbe2k3

Answer:

The answer is 5.71%

Explanation:

Solution

Given that

Coupon rate = 7%

Bond = $1050

Sale of the bond = $1040

n = 10 years, n = 1 year

Now we find the investor's rate of return

Thus

Coupon payment = 7%* 1000

=70

1050 = 70/(1+r) + $1,040/(1+r)

r= 5.71%

Therefore the rate of return of the investor is 5.71%

or

Rate of return = (P1-P0+ Interest ) /P0

= (1040 -1050 + 70 )/1050

= .0571 or 5.71%

Otras preguntas