Question

Taussig Corp.'s bonds currently sell for $1020. They have a 6.5% annual coupon rate and a 10year maturity. What rate of return should an investor expect to earn if he or she purchases these bonds?

Answer 1

Principal = $1020
annual rate= 6.5%
time = 10 years
Amount = 1020 [1 + 0.65/100]^10
Amount = 1914.68

Rate of return =
`((1914.68-1020)*100)/(1020)`
Rate of return = 87.71% Answer