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Elena-2011 [213]
2 years ago
14

Chelsea bought a bond with a face value of $5,000. The bond has a term of 4 years. Chelsea bought the bond at a 3 percent discou

nt from the face value. The bond pays 3 percent annual interest, and Chelsea will receive eight semiannual payments. When the bond is redeemed at maturity, the total return (profit) will be $
_____ .00. The total return on investment will be
______ %. (Round return on investment percentage to one decimal place.)
Business
2 answers:
meriva2 years ago
6 0

Answer:

profit: $750

ROI: 15.5%

Explanation:

Kamila [148]2 years ago
4 0

The total return of the bond will be a profit of $300 and the total return on investment (ROI) will be 6.18%.

<h3>What will be the total return and return on investment?</h3>

The profit made from the purchase of bonds is referred to as the return on bonds. The profit includes all capital gains (discounts obtained) and interest earnings till maturity.

\text{Face value} = 5,000\\\\\text{Purchase price} = 4,850 (5,000 \text{ x } 1 - 0.03)\\\\\text{Discount} = 150 (5,000 - 4,850)\\\\\text{Maturity period} = 4 years\\\\\text{Coupon rate} = 0.03\\\\\text{Interest payment = semi-annual}\\\\\text{Annual interest} = $150 ($5,000 \text{ x } 0.03)\\\\\\\text{Total profit at maturity} = $300 ($150 + $150)\\\\\\text{Total return on investment} = 6.18 \text{percent} (300/4,850 \text{ x } 100)

As a result, when Chelsea redeems the bond at maturity, his total return (profit) will be $300.00 at 6.18 percent.

Check out the link below to know more about Return on Investments;

brainly.com/question/23299001

#SPJ1

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Explanation:

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