What was the investor's rate of return on these financial accounting question? An investor buys a four-year, 8% coupon bond for$1,050, holds it for one year, and then sells the bondfor $1,070. What was the investor's rate of return?a. 7.5%b. 6.2%c. 9.5%d. 5.9%

Step 1: Define Rate of ReturnThe rate of return is the percentage gain or loss on an investment…

Answered: An investor buys a four-year, 8% coupon…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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What was the investor's rate of return?
You purchased a coupon-bearing bond at $800 and resold it at $900 after exactly one year. If the coupon is $60 paid annually, what is the current yield of the bond? O A. 0.075 O B. 0.125 O C. 0.067 O D. 0.200
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3. An investor buys a 10 year, 3% coupon, ATT bond for $93. The par value is $100. What is the YTM at the time of the purchase. Three years later the bond is sold for $95. What is the YTM at the time of the sale?. What has happened to interest rates over the three years? What is the percent return for the investor after selling the bond?
Suppose you purchase a 10-year bond with 6.64% annual coupons. You hold the bond for 4 years, and sell it immediately after receiving the fourth coupon. If the bond's yield to maturity was 5.17% when you purchased and sold the bond, a. what cash flows will you pay and receive from your investment in the bond per $100 face value? b. what is the annual rate of return of your investment? a. What cash flows will you pay and receive from your investment in the bond per $100 face value? The cash flows from the investment are shown in the following timeline: (Round to the best choice below.) OA. Years Cash Flows O B. Years C. Years Cash Flows Cash Flows - $114.06 O D. Years 0 Cash Flows $107.42 0 0 - $111.26 0 $111.26 1 $6.64 1 $6.64 1 $6.64 1 $6.64 2 $6.64 2 + $6.64 2 + $6.64 2 + $6.64 3 $6.64 3 $6.64 3 $6.64 3 $6.64 b. What is the annual rate of return of your investment? The annual rate of return of your investment is %. (Round to two decimal places.) 4 $114.06 4 $107.42 4 $114.06 4…
Suppose you purchase a 10-year bond with 6% annual coupons. You hold the bond for fouryears, and sell it immediately after receiving the fourth coupon. If the bond’s yield to maturitywas 5% when you purchased and sold the bond,a. What cash flows will you pay and receive from your investment in the bond per $100 face value?b. What is the internal rate of return of your investment?
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An investor purchases a 30-year, zero-coupon bond with a face value of $5,000 and a yield to maturity of 6.3%. He sells this bond ten years later. What is the rate of return on his investment, assuming yield to maturity does not change? OA. 3.78% OB. 6.3% OC. 5.04% OD. 3.15%
Suppose you purchase a 10-year bond with 6.4% annual coupons. You hold the bond for four years, and sell it immediately after receiving the fourth coupon. If the bond's yield to maturity was 5.5% when you purchased and sold the bond, a. what cash flows will you pay and receive from your investment in the bond per $100 face value? b. what is the annual rate of return of your investment? a. What cash flows will you pay and receive from your investment in the bond per $100 face value? The cash flows from the investment are shown in the following timeline: (Round to the best choice below.) A. Year 0 1 2 3 4 Cash Flows $110.90 $6.40 $6.40 $6.40 $104.50 B. Year 0 1 2 3 4 Cash Flows - $106.78 $6.40 $6.40 $6.40 $110.90 C. Year 0 2 3 4 Cash Flows $104.50 $6.40 $6.40 $6.40 $110.90 OD. Year 1 2 3 Cash Flows $106.78 $6.40 $6.40 $6.40 $110.90 b. What is the annual rate of return of your investment? The annual rate of return of your investment is %. (Round to one decimal place.)

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An investor buys a four-year, 8% coupon bond for $1,050, holds it for one year, and then sells the bond for $1,070. What was the investor's rate of return? a. 7.5% b. 6.2% c. 9.5% d. 5.9%