Question

6. Six years ago, Bradford Community Hospital issued 20-year municipal bond with 7 % annual coupon rate. The bonds were called today for a $70 call premium- that is, bondholders received $1,070 for each bond. What is the realized rate of return for those investors who bought the bonds for $1,000 when they were issued

Answer 1

7.96%

Step-by-step explanation:

We have to use the RATE formula that is shown in the spreadsheet.

Provided that,

Present value = $1,000

Assuming figure - Future value or Face value = $1,070

PMT = 1,000 × 7% = $70

NPER = 6 years

The formula is shown below:

= Rate(NPER,PMT,-PV,FV,type)

The present value come in negative

Therefore, the realized rate of return is 7.96%