You purchase a 8 1/2s 2009 Feb. $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

The rate of return is calculated based on the interest received and the change in price. Since the purchase and selling price are the same, the return is solely from the interest, which is 8.5% of $10,000 par value. The rate of return is slightly less than 8.5% due to the premium paid, resulting in approximately 8.06%.

You Purchase a 8 1/2s 2009 Feb