Answer:
The total dollar return on this investment over the past year is $145.
Explanation:
The total return will be the sum of the interest income received from the bond and any price apppreciation received after one year period.
First we need to determine the interest income
Interest income = Face value of the bond x Coupon rate
where
Face value = $1,000
Coupon rate = 8%
Interest income = $1,000 x 8%
Interest income = $80
Now calculate the price appreciation
Price appreciation = Present value of the bond - Purchase value of the bond
Where
Present value of the bond = $1,135
Purchase value of the bond = $1,070
Placing values in the formula
Price appreciation = $1,135 - $1,070
Price appreciation = $65
Now calculate the total return
Total return = Interest income + Price appreication
Total return = $80 + $65
Total return = $145
