One year ago, an investor purchased a 10-year 8% annual coupon bond at par of $1,000. Today (with 9 years to maturity) the bond is priced to yield 7.40%. If the bond is sold, what is the total return to the investor (interest plus appreciation) for the 1-vear holding period? Hint: The total return includes the coupon rate plus the appreciation (or depreciation) due to the change in rates. Therefore, calculate the current price based on the yield, and then calculate the total return over 1 year based on that price and the coupon payment. Your answer should be between 6.32 and 17.42, rounded to 2 decimal places, with n

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Bond Valuation

Bond valuation are the notes issued by the corporation to raise long-term funds for the business. The corporations are required to pay the interest on such liabilities at a specified rate of interest (termed as coupon rate) at specified dates which may be on semi-annual or annual basis. These interest payments may be in the form of coupons.