Question

An investor buys a bond. At the end of the first year, the bond is worth $1,300. During the year, the investment paid $20 in interest and had a capital gain of $250. What is the Total Return

Answer 1

25.71%

Step-by-step explanation:

An investor makes a bond purchase

At the end of the first year The bond is worth $1,300

The investment paid $20 in interest

The capital gain is $250

The first step is to calculate the cost of security

= $1,300-$250

= $1,050

Therefore, the total return can be calculated as follows

Total return= capital gain+income/cost of security

= $20 + $250/$1,050

= $270/$1,050

= 0.2571×100

= 25.71%

Hence the total return is 25.71%