Question

the nominal rate of return is ___ earned by an investor in a bond that was purchased for $953, has an annual coupon of 4% and was sold at the end of year for $1007

Answer 1

Answer: 9.86%

Explanation:

Nominal rate of return given the above values can be calculated as:

= (Price - Purchase price + Coupon payment) / Purchase price

= (1,007 - 953 + 40) / 953

= 9.86%

Coupon = Coupon rate * face value of bond which should be $1,000

= 4% * 1,000

= $40