You buy a bond that pays annual interest payments of 7% of the bond’s face value of $1000. You initially pay $950 for the bond. You receive an annual interest payment after one year, then sell the bond for $880. What is your total rate of return on the investment, expressed as a percentage of the purchase price?
You buy a bond that pays annual interest payments of 7% of the bond’s face value of $1000. You initially pay $950 for the bond. You receive an annual interest payment after one year, then sell the bond for $880. What is your total rate of return on the investment, expressed as a percentage of the purchase price?
Chapter5: The Time Value Of Money
Section: Chapter Questions
Problem 17P
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- You buy a bond that pays annual interest payments of 7% of the bond’s face value of $1000. You initially pay $950 for the bond. You receive an annual interest payment after one year, then sell the bond for $880. What is your total rate of
return on the investment , expressed as a percentage of the purchase price?
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