One year ago, Kyra purchased a ten-year 5% corporate bond for $986. The bond is currently selling for $1,002. If Kyra sells the bond today, what is the dollar amount of the total return she would realize on this investment?

Question

Quizplus · Accepted Answer

Kyra's total return includes both the capital gain and the interest income. The capital gain is the difference between the selling price ($1,002) and the purchase price ($986), which is $16. The interest income from a 5% bond on a $1,000 face value is $50 (5% of $1,000). Therefore, the total return is the sum of the capital gain and the interest income: $16 (capital gain) + $50 (interest income) = $66.

One Year Ago, Kyra Purchased a Ten-Year 5% Corporate Bond