Answer:
-5.72%
Explanation:
Total rate of return = (Total return/net loss ÷ Purchase Price) × 100 ......... (1)
Loss on sales = Purchase price - Sales price = $1102 - $989 = $113.
Net loss = Coupon received - loss on sales = $50 - $113 = -$63
Substituting the values into equation (1), we have:
Total rate of return = ((-63) ÷ 1,102) × 100 = -5.72%
Therefore, the total rate of return is -5.72%. It is negative because the coupon bond led into net loss.
Answer:
The rate of return is found to be -5.72%. The negative sign indicate that the bond resulted in a loss.
Explanation:
The total rate of return r is given as
[tex]r=\dfrac{Net \,Return/Loss}{Purchase\, Price}\times 100\%[/tex]
Here the value of the net return or loss is given as
[tex]Loss \,on\, sales = Purchase\, price - Sales \,price = \$1102 - \$989 = \$113.[/tex]
[tex]Net\, loss = Coupon\, received - loss\, on\, sales = \$50 - \$113 = -\$63[/tex]
So the rate of return is as
[tex]r=\dfrac{Net \,Return/Loss}{Purchase\, Price}\times 100\%\\r=\dfrac{63}{1102}\times 100\%\\r=-5.72\%[/tex]
As the rate of return is found to be 5.72%. The negative sign indicate that the bond resulted in a loss.
