Last year Janet purchased a $1,000 face value corporate bond with an 11% annual coupon rate and a 15-year maturity. At the time of the purchase, it had an expected yield to maturity of 13.96%. If Janet sold the bond today for $1,023.28, what rate of return would she have earned for the past year? Do not round intermediate calculations. Round your answer to two decimal places. %
a | Annual Coupon Amount | $ 110.00 | |
b | Present Value Annuity Factor for (15 Years,13.96%) | 6.154471 | |
c | Present Value Of Annual Interest (a*b) | $ 676.99 | |
d | Redemption Value | $ 1,000.00 | |
e | Present Value Of (15 Years,13.96%) | 0.14084 | |
g | Present Value Of Redemption Amount (d*e) | $ 140.84 | |
f | Bond price(c+g) | $ 817.83 | |
Rate of return earned = (sale price - purchase price ) + coupon amount / purchase price | |||
= [(1023.28-817.83)+110]/817.83 | |||
=38.57% |
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