Answer:
hence investor's rate of return is 10.26%
Step-by-step explanation:
Given data
time = 5 year
rate = 9%
coupon bond = $975
sell bond = $985
at time = 1 year
to find out
investor's rate of return
solution
we will find first here Coupon payment that is
Coupon payment = 9% of 1000 that is $90
so that we can say that coupon bond will be
975 = 90 / (1 + r ) + $985 / (1 + r )
solve here r we get r
rate r = 10.26 %
so
hence investor's rate of return is 10.26%