Question

Two years ago the price of a bond was 1923.00, and one year ago, the price of the bond was $982.00 Over the past year, the bond paid a total o

$70.00 in coupon payments, which were just paid, if the bond a currently priced at $94.00 then what was the rate of return for the band over t
year (from 1 year ago to today? The par value of the band is $1,000
a. 3.90 (plus or minus 82 percentage points)
b. 13.90 (plus or minus 82 percentage polets)
c. 12.75 (plus or minus 62 percentage points)
d. 377 (plus or minus 92 percentage points)
e. None of the above is within 02 percentage points of the correct ans

Answer 1

The rate of return for the bond over the past year is 22.6%.

Step-by-step explanation:

To calculate the rate of return for the bond over the past year, we need to find the percentage change in the bond price from one year ago to today. The bond price one year ago was $982.00, and the current price is $94.00. The change in price is ($94.00 - $982.00)/$982.00 = -0.904 or -90.4%. Since the bond paid $70.00 in coupon payments over the past year, we need to consider this as part of the total return.

To calculate the rate of return including the coupon payments, we divide the total return of -90.4% by the bond price one year ago. (-0.904 - 0.70)/$982.00 = -0.226 or -22.6%. Therefore, the rate of return for the bond over the past year is 22.6%.