A savvy investor paid $5,000 for a 20-year $10,000 mortgage bond that had a bond interest rate of 2% per year, payable quarterly. Three years after he purchased the bond, market interest rates went down, so the bond increased in value. If the investor sold the bond for $12,000 three years after he bought it, what rate of return did the investor make per quarter and per year (nominal)? The rate of return per quarter is %. The rate of return per year is %.

A savvy investor paid $5,000 for a 20-year $10,000 mortgage bond that had a bond interest rate of 2% per year, payable quarterly. Three years after he purchased the bond, market interest rates went down, so the bond increased in value. If the investor sold the bond for $12,000 three years after he bought it, what rate of return did the investor make per quarter and per year (nominal)? The rate of return per quarter is %. The rate of return per year is %.

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter2: The Domestic And International Financial Marketplace

Section: Chapter Questions

Problem 3P

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