You purchase an 8 1/2s February $10,000 par Treasury note at 105:16 and hold it for exactly one year at which time you sell it. What is your rate of return if your selling price is 105:16?

Question

Quizplus · Accepted Answer

To calculate the rate of return, you need to use the following formula: 
Rate of return = [(Selling price - Purchase price) / Purchase price] x (365/days held)
Purchase price = 105 16/32 or 105.5 
Selling price = 105 16/32 or 105.5
Days held = 365 
[(105 16/32 - 105 16/32) / 105 16/32] x (365/365) = 0 
The rate of return is 0 or 0%, so you didn't make or lose any money.

However, the answer choices don't match this calculation, so we have to look at other possibilities. The closest answer is B, which is 8.06%, but this is not the correct answer. Therefore, there might be a mistake in the question or answer choices.

You Purchase an 8 1/2s February $10,000 Par Treasury Note