Assume you bought a $1000 par value bond in 2004 for 85 1/4 with an interest rate of 4.7 percent. If you held the bond until maturity in 2014, what would be the total amount that you would earn on this bond?

Question

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The total amount earned includes the interest payments over the 10 years plus the difference between the purchase price and the par value at maturity. The purchase price is 85.25% of $1000, which is $852.50. The bond pays 4.7% of $1000 annually, which is $47 per year for 10 years, totaling $470. The difference between the par value ($1000) and the purchase price ($852.50) is $147.50. Adding the interest payments ($470) to this difference ($147.50) gives a total of $617.50 earned.

Assume You Bought a $1000 Par Value Bond in 2004 $$47000 E) the Amount Cannot Be Calculated Given the Information

Assume You Bought a $1000 Par Value Bond in 2004 $$47000
E) the Amount Cannot Be Calculated Given the Information