Alvin has bought a bond from Company ABC at RM1,020 in year 2020. The face value of the bond is RM1,000 with the coupon rate of 5%. One year later, Alvin liquidated the bond with the price of RM1,100. Calculate the expected return of the corporate bond.
Alvin has bought a bond from Company ABC at RM1,020 in year 2020. The face value of the bond is RM1,000 with the coupon rate of 5%. One year later, Alvin liquidated the bond with the price of RM1,100. Calculate the expected return of the corporate bond.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
Related questions
Question
Alvin has bought a bond from Company ABC at RM1,020 in year 2020. The face value of the bond is RM1,000 with the coupon rate of 5%. One year later, Alvin liquidated the bond with the price of RM1,100.
Calculate the expected return of the corporate bond.
Expert Solution
Step 1
Purchase price of bond = RM 1020
Face value of bond = RM 1000
Coupon rate = 5%
Coupon amount = 1000*0.05 = RM 50
Sale price after 1 year = RM 1100
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