Homework SourseOne year ago you purchased a 6 coupon bond with a face value
One year ago, you purchased a 6% coupon bond with a face value of $1000 when it was selling for 98.6% of par. Today you sold this bond for 101.2% of par. What is your total dollar return on this investment?
One year ago, you purchased a 6% coupon bond with a face value of $1000 when it was selling for 98.6% of par. Today you sold this bond for 101.2% of par. What is your total dollar return on this investment?
Solution
Cooupon value=$1000*6%=$60
Price paid one year ago=$1000*98.6%=$986
Current price=$1000*101.2%=$1012
Hence total dollar return=(Current price-Price paid one year ago+Coupon value)
=(1012-986+60)
=$86
