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One year ago you purchases a 7 percent semi annual coupon bond with a face value...

One year ago you purchases a 7 percent semi annual coupon bond with a face value of $1000 and a yeild to maturity 6.8% when it was selling for 102.5% of par. today you sold this bond the bond has seven years to maturity and yeild to maturity of 5.2 percent what is your total dollar return on this investment?
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Answer #1

Price of Bond while buying=102.5% par=102.5%*1000= 1025$

Current yield to maturity= 5.2;

coupon rate=7% = 70 annualy (35 semi annualy)

Current price= present value of all the cash flows for 7 years discounted at ytm.

Term 1 2 3 4 5 6 7 8 9 10 11 12 13 14
Payments 35 35 35 35 35 35 35 35 35 35 35 35 35 1035
PV 34.11306043 33.24859691 32.40603987 31.58483418 30.78443878 30.00432629 29.24398274 28.50290715 27.78061126 27.07661916 26.39046702 25.72170275 25.06988572 722.5656285
NPV 1104.493101

Selling price of Bond=1104.5 $

Hence return on investment= Selling price- buying price + semi annual payment for 2 terms last year

ie; Return in dollars= 1104.5-1025 +35+35

=149.5 $

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