Answer:
The question is incomplete, so I looked for similar questions. I found the following information:
- you purchased bonds with a 6% coupon rate, that yield 7% and 10 years to maturity
First we must determine the price of the bonds when you purchased them:
PV of face value = $1,000 / (1 + 7%)¹⁰ = $508.35
PV of coupon payments = $60 x 7.0236 PV annuity factor, 7%, 10 periods) = $421.42
market price = $508.35 + $421.42 = $929.77
after 1 year, you received $60 (coupon)
the market price of the bond:
PV of face value = $1,000 / (1 + 5%)⁹ = $644.61
PV of coupon payments = $60 x 7.1078 (PV annuity factor, 5%, 9 periods) = $426.47
market price = $644.61 + $426.47 = $1,071.08
total gain = $60 + ($1,071.08 - $929.77) = $201.31
rate of return = $201.31 / $929.77 = 21.65%