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steposvetlana [31]
3 years ago
8

. January 1, 2002 you bought a coupon bond for $1102. You received a coupon of $50 on December 30 . On January 1, 2003, you sold

the bond for $989. What was your total rate of return? Show your work.
Business
2 answers:
Natalka [10]3 years ago
8 0

Answer:

-5.72%

Explanation:

Total rate of return = (Total return/net loss ÷ Purchase Price) × 100 ......... (1)

Loss on sales = Purchase price - Sales price = $1102 - $989 = $113.

Net loss = Coupon received - loss on sales = $50 - $113 = -$63

Substituting the values into equation (1), we have:

Total rate of return = ((-63) ÷ 1,102) × 100 = -5.72%

Therefore, the total rate of return is -5.72%. It is negative because the coupon bond led into net loss.

Likurg_2 [28]3 years ago
5 0

Answer:

The rate of return is found to be -5.72%. The negative sign indicate that the bond resulted in a loss.

Explanation:

The total rate of return r is given as

r=\dfrac{Net \,Return/Loss}{Purchase\, Price}\times 100\%

Here the value of the net return or loss  is given as

Loss \,on\, sales = Purchase\, price - Sales \,price = \$1102 - \$989 = \$113.

Net\, loss = Coupon\, received - loss\, on\, sales = \$50 - \$113 = -\$63

So the rate of return is as

r=\dfrac{Net \,Return/Loss}{Purchase\, Price}\times 100\%\\r=\dfrac{63}{1102}\times 100\%\\r=-5.72\%

As  the rate of return is found to be 5.72%. The negative sign indicate that the bond resulted in a loss.

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