Question

Four years earlier, Janice purchased a $1,000 face value corporate bond with a 6% annual coupon, and maturing in 10 years. At the time of the purchase, it had an expected yield to maturity of 8.76%. If Janice sold the bond today for $1,088.39, what rate of return would she have earned for the last four years? *Please show step by step without using PVIFA(YTM, n). Thank you.

Answer 1

13.93%

Step-1:Calculation of initial Price
Initial Price	=-pv(rate,nper,pmt,fv)
	= $ 820.99
Where,
rate	=	Discount rate	=	8.76%
nper	=	Time	=	10
pmt	=	Coupon Payment	=	$          60
fv	=	Face Value	=	$    1,000
Step-2:Calculation of rate of return
Rate of return	=rate(nper,pmt,pv,fv)
	= 13.93%
Where,
nper	=	4
pmt	=	$             60
pv	=	$   -820.99
fv	=	$ 1,088.39