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A bond has a face value of $1,000, a coupon of 4% paid annually, a maturity...

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Finance

A bond has a face value of $1,000, a coupon of 4% paid annually,a maturity of 33 years, and a yield to maturity of 7%. What rate ofreturn will be earned by an investor who purchases the bond for$617.39 and holds it for 1 year if the bond’s yield to maturity atthe end of the year is 8%?

The answer -15.82% is being marked as wrong please help!

Answer & Explanation Solved by verified expert
3.5 Ratings (615 Votes)
Rate of return earned by the investor Current Price of the Bond 61739 Price of the Bond in One Year Face Value 1000 Annual Coupon Amount 40 1000 x 4 Yield to Maturity YTM of the Bond 8 Maturity Years 32    See Answer
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Transcribed Image Text

A bond has a face value of $1,000, a coupon of 4% paid annually,a maturity of 33 years, and a yield to maturity of 7%. What rate ofreturn will be earned by an investor who purchases the bond for$617.39 and holds it for 1 year if the bond’s yield to maturity atthe end of the year is 8%?The answer -15.82% is being marked as wrong please help!

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