Final answer:
Windsor company sold 3840 of its 8% bonds with face value $1000 each, plus accrued interest. The yield on the bond can be calculated by dividing the total return by the initial investment. When interest rates change, bond prices also change.
Step-by-step explanation:
In this question, Windsor company sold 3840 of its 8% bonds with a face value of $1000 each, plus accrued interest. The investor will receive the face value of the bond plus the interest that has accrued. Windsor company sold 3840 of its 8% bonds with face value $1000 each, plus accrued interest. The yield on the bond can be calculated by dividing the total return by the initial investment. When interest rates change, bond prices also change.
The yield on the bond can be calculated by dividing the total return (which includes interest payments and capital gains) by the initial investment. When interest rates rise, previously issued bonds will sell for less than face value, and when interest rates fall, previously issued bonds will sell for more than face value.