An investor buys a 5-year $1,000, 9% coupon bond for $975, holds it for 1 year, and then sells the bond for $985.What was the investor's rate of return?

Name: An investor buys a 5-year $1,000, 9% coupon bond for $975, holds it for 1 year, and then sells the bond for $985.What was the investor's rate of return?
Brand: Quizplus
Rating: 5.0 (49 reviews)

Question

Quizplus · Accepted Answer

The investor earns $90 from the coupon and $10 from the price increase ($985 - $975), totaling $100. The rate of return is $100/$975 = 10.26%.

An Investor Buys a 5-Year $1,000, 9% Coupon Bond for $975