in valu ought it nomina

EBK CONTEMPORARY FINANCIAL MANAGEMENT
14th Edition
ISBN:9781337514835
Author:MOYER
Publisher:MOYER
Chapter2: The Domestic And International Financial Marketplace
Section: Chapter Questions
Problem 3P
icon
Related questions
Question
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
%.
Transcribed Image Text: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 %.
Expert Solution
steps

Step by step

Solved in 2 steps with 2 images

Blurred answer
Knowledge Booster
Financial Statements
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.
Similar questions
Recommended textbooks for you
EBK CONTEMPORARY FINANCIAL MANAGEMENT
EBK CONTEMPORARY FINANCIAL MANAGEMENT
Finance
ISBN:
9781337514835
Author:
MOYER
Publisher:
CENGAGE LEARNING - CONSIGNMENT
Principles of Accounting Volume 1
Principles of Accounting Volume 1
Accounting
ISBN:
9781947172685
Author:
OpenStax
Publisher:
OpenStax College