One year ago, you purchased an 8% coupon rate bond when it was first issued and priced at its face value of $1,000. Yesterday the bond paid its second semi-annual coupon. The bond currently has 7 years left until maturity and has a yield to maturity of 12%. If you sell the bond today, what will your return have been from this investment during the year you held the bond and collected the coupon payments?
Price of Bond Today = "PV(rate, nper, pmt, [fv])"
Rate Required. The interest rate per period.
Nper Required. The total number of payment periods in an annuity.
Pmt Required. The payment made each period and cannot change over the life of the annuity.
Fv Optional. The future value, or a cash balance you want to attain after the last payment is made.
Price of Bond Today = "PV(rate, nper, pmt, [fv])"
Price of Bond Today = "PV(0.06, 14, 40, 1000)"
Price of Bond Today = $814.10
Return on Investment = (Sale Price - Purchase + Coupon) / Purchase Price
Return on Investment = (814.10 - 1000 + 80) / 1000
Return on Investment = -10.60%
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