Question

One year ago, you purchased a 7 percent coupon bond with a face value of $1,000 when it was selling for 102.5 percent of par. Today, you sold this bond for 104 percent of par. What is your total dollar return on this investment?

Answer 1

Answer:

Total Dollar return on Investment = $85

Explanation:

Coupon rate = 7%

Coupon Payment ($1,000×7%) = $70

Selling Price of the bond ($1,000×102.5)  = $1025

Today’s selling price of the bond ($1,000×104%) =$1,040

$1,040 - $1025 + $70 = $85

Total Dollar return on Investment = $85