One year ago, you purchased a 6 percent coupon bond with a face value of $1,000 when it was selling for 98.6 percent of par. Today, you sold this bond for 101.2 percent of par. What is your total dollar return on this investment?

$86$74$82$60$64

Question

Business

Martin Cherry

8 December, 10:47

One year ago, you purchased a 6 percent coupon bond with a face value of $1,000 when it was selling for 98.6 percent of par. Today, you sold this bond for 101.2 percent of par. What is your total dollar return on this investment?

$86$74$82$60$64

+3

Answers (1)

Know the Answer?

Marco Mckinney · Answer 1

option (A) $86

Explanation:

Data provided in the question:

Coupon rate = 6%

Face value of bonds = $1,000

Purchasing price (i. e the selling percentage at the time of purchase)

= 98.6% of par

Selling price = 101.2% of par

Thus,

Annual Coupon payment = Face value * Coupon rate

= $1,000 * 6%

= $60

Now,

Purchase price = $1,000 * 98.60%

= $986

Sales price = Face value of bonds * Selling price

= $1,000 * 101.20%

= $1,012

Therefore,

Total dollar Return

= Sales price + Annual Coupon payment - Purchase price

= $1,012 + $60 - $986

= $86

Hence,

The correct answer is option (A) $86

One year ago, you purchased a 6 percent coupon bond with a face value of $1,000 when it was selling for 98.6 percent of par. Today, you sold this bond for 101.2 percent of par. What is your total dollar return on this investment?$86$74$82$60$64

One year ago, you purchased a 6 percent coupon bond with a face value of $1,000 when it was selling for 98.6 percent of par. Today, you sold this bond for 101.2 percent of par. What is your total dollar return on this investment?

$86$74$82$60$64