Question

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. %

Answer 1

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%