Question

A bond had a price of $1,945.77 at the beginning of the year and a price of $1,977.81 at the end of the year. The bond's par value is $2,000 and its coupon rate is 4.8 percent. What was the percentage return on the bond for the year?

Answer 1

Answer: 6.58%

Step-by-step explanation:

The percentage return on the bond for the year will be calculated thus:

= (Ending price + Interest - Initial price) / Initial price

= ($1977.81 + $96 + $1,945.77) / $1,945.77

= 0.0658

= 6.58%

Note that interest was calculated as:

= 4.8% × 2000

= 0.048 × 2000

= 96