Adam buys a two-year bond with $1,000 face-value and 10% coupon rate for $1,000 today. If one year later the market interest rate increases by 6% and Adam sells the bond, then his rate of return on this investment is____________________% (round to one decimal place (x.x), negative if it is a loss).

Adam buys a two-year bond with $1,000 face-value and 10% coupon rate for $1,000 today. If one year later the market interest rate increases by 6% and Adam sells the bond, then his rate of return on this investment is____________________% (round to one decimal place (x.x), negative if it is a loss).

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter5: The Time Value Of Money

Section: Chapter Questions

Problem 17P

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Definition Definition Percentage gain or loss from a specific investment over time. The rate of return is the difference between the closing and initial values of an investment divided by the initial value of the investment. The closing value includes any intermediate cash flows such as dividends or interest amounts.

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Adam buys a three-year bond with $1,000 face-value and 10% coupon rate for $1,000 today. If one year later the market interest rate increases by 5% and Adam sells the bond, then his rate of return on this investment is__________________ % (round to one decimal place (x.x), negative if it is a loss). Question 19 options:
Adam buys a three-year bond with a $1000 face value and a 10% coupon rate for $1000 today. If one year later the market interest rate increases by 5% and Adam sells the bond, then his rate of return on this investment is ______% (round to one decimal place, negative if it is a loss)
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