Question

Tom bought 5 bonds with $1,000 face value for $1,100 5 years ago. The coupon rate is 8%. Tom sold the bond for $900 today. What is Tom’s total percentage return?

Answer 1

18.18%

Step-by-step explanation:

Income = Coupon amount over the period of holding

Income =($1000*8%)*5

Income =$400

Capital gain/(loss)=Sale price - Purchase price

Capital gain/(loss)=$900 - $1100

Capital gain/(loss)=-$200

Total percentage return=[(Income+Capital gain)/Purchase Price]*100

=[$400+(-$200)]/$1100]*100

=[$200/$1100]*100

=18.18%