Last year Janet purchased a $1,000 face value corporate bond with an 7% annual coupon rate and a 20-year maturity. At the time of the purchase, it had an expected yield to maturity of 9.73%. If Janet sold the bond today for $990.49, what rate of return would she have earned for the past year? Do not round intermediate calculations. Round your answer to two decimal places.
|Computation Purchase Price of the Bond|
|a||Annual Coupon Amount||$ 70.00|
|b||Present Value Annuity Factor for (20 Years,9.73%)||8.672845|
|c||Present Value Of Annual Interest (a*b)||$ 607.10|
|d||Redemption Value||$ 1,000.00|
|e||Present Value Of (20 Years,9.73%)||0.15613|
|g||Present Value Of Redemption Amount (d*e)||$ 156.13|
|f||Bond price(c+g)||$ 763.23|
|Rate of return earned = (sale price - purchase price ) + coupon amount / purchase price|
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