Realized yield: Rachel McGovern bought a 10-year bond for $921.77 seven years ago. The bond pays a coupon of 15 percent semiannually. Today, the bond is priced at $961.92. If she sold the bond today, what would be her realized yield? (Round to the nearest percent.)

Question

Quizplus · Accepted Answer

The realized yield is the total return on an investment, including both capital gains and income. In this case, the capital gain is the difference between the purchase price and the sale price of the bond, which is $961.92 - $921.77 = $40.15. The income is the total amount of interest payments received over the life of the bond, which is 15% x $1,000 x 7 = $1,050. The realized yield is the sum of the capital gain and the income, divided by the purchase price, which is ($40.15 + $1,050) / $921.77 = 17.9%.

Realized Yield: Rachel McGovern Bought a 10-Year Bond for $921