You purchase a 9 3/4s 2009 Feb. $10,000 par Treasury Note at 101:11 and hold it for exactly one year at which time you sell it. What is your rate of return if your selling price is 101:17?
A) 8.14%
B) 8.75%
C) 9.75%
D) 9.81%
E) 10.47%

Question

Quizplus · Accepted Answer

The correct answer is D.The rate of return is calculated as follows:Rate of return = (Selling price - Purchase price + Coupon payments) / Purchase priceSelling price = 101:17 = 101.17Purchase price = 101:11 = 101.11Coupon payments = $10,000 * 3.75% = $375Rate of return = (101.17 - 101.11 + 375) / 101.11 = 9.81%

You Purchase a 9 3/4s 2009 Feb