Final answer:
The total annual return is the compound annual growth rate (CAGR) calculated using the initial investment, the cumulative coupon payments and reinvestment earnings, and the selling price of the bond. After calculating using the provided figures, the return is approximately 6.76%.
Step-by-step explanation:
To calculate the total annual return of your bond, we need to consider the initial investment, the coupon payments received over the years, any reinvestment earnings, and the selling price of the bond.
The initial investment was $1,076.95, and over 7 years, you received coupon payments at a 9% annual rate, paid semiannually, on a $1,000 par value bond. This means each semiannual coupon payment was ($1,000 * 0.09) / 2 = $45.00. You've also mentioned that over the 7 years, you reinvested these payments and received a total of $63.26 from those investments.
At the end of the 7 years, you sold the bond for $1,021.50. Therefore, your total earnings from selling the bond and reinvested coupons are ($1,021.50 + $63.26 - $1,076.95) = $7.81. Now, to find the annual return, you need to calculate the compound annual growth rate (CAGR) given the initial investment, the final value, and the time period.
The CAGR formula is ((Ending value / Beginning value) ^ (1 / Number of years)) - 1. Plugging the relevant figures, we have ((($1,021.50 + $63.26) / $1,076.95) ^ (1 / 7)) - 1.
After performing the calculations, you would end up with the total annual return of approximately 6.76%, which you can report as your answer.