Question

There are two bonds: a corporate bond with a yield of 12 percent and a municipal bond with a yield of 7 percent. What is the rate of return for the corporate bond and the municipal bond?

1) 12 percent for the corporate bond and 7 percent for the municipal bond
2) 7 percent for the corporate bond and 12 percent for the municipal bond
3) 12 percent for both the corporate bond and the municipal bond
4) 7 percent for both the corporate bond and the municipal bond

Answer 1

The rate of return for the corporate bond is 12 percent, while the rate of return for the municipal bond is 7 percent.

Step-by-step explanation:

The rate of return for the corporate bond is 12 percent, while the rate of return for the municipal bond is 7 percent.

The rate of return is calculated by subtracting the initial investment from the final value of the investment and dividing it by the initial investment. In this case, the corporate bond has a yield of 12 percent, which means it earned 12 percent on the initial investment. Similarly, the municipal bond has a yield of 7 percent.

It's important to note that the yield refers to the total return, which includes both interest payments and capital gains.