Five years ago, Shirley Harper bought a 10-year bond that pays 8 percent semiannually for $981.10. Today, she sold it for $1,067.22. What is the realized yield on her investment? (Round to the nearest percent.)

Question

Quizplus · Accepted Answer

The realized yield can be calculated by considering both the interest payments received and the capital gain on the bond. Shirley bought the bond for $981.10 and sold it for $1,067.22, realizing a capital gain. Additionally, she received semiannual interest payments at an 8% annual rate for 5 years. The realized yield combines these income streams and the capital gain, and when calculated correctly, it rounds to approximately 10%.

Five Years Ago, Shirley Harper Bought a 10-Year Bond That