Question

A bond had a price of $1,946.61 at the beginning of the year and a price of $1,982.79 at the end of the year. The bond's par value is $2,000 and its coupon rate is 6 percent. What was the percentage return on the bond for the year?

Answer 1

The percentage return on the bond is %8.02

Step-by-step explanation:

To calculate a return of a bond we take value of bond at maturity and add the coupon payments as they are capital gains/ subtract if they are loses and subtract the original price of the bond also divide by original price

Price at the beginning $1,946.61

Price at the end $1,982.79

Coupon 2000*6* = $120

return = 1982.79 - 1946.61 + 120 /1946.61

=0.0802/%8.02

Answer 2

The percentage return on the bond is 8.02%

Step-by-step explanation:

The return on the bond comprises of the increase or decrease in bond's price plus the coupon earned by investors on the bond in the year.

The difference in market price is considered that is the amount could be sold for in the market price at that point in time.

The return on the bond is computed thus:

closing price minus opening price ($1,982.79-$1,946.61)=$36.18

plus coupon received($2000*6%) =$120

total return $156.18

% return =total return/opening price

=$156.18/$1946.61

=8.02%