Question

Last year Janet purchased a $1,000 face value corporate bond with an 11% annual coupon rate...

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. %

Homework Answers

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%
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