CS Compound Interest Form x flow/co ml work mode : This shows what is correct or
ID: 2600085 • Letter: C
Question
CS Compound Interest Form x flow/co ml work mode : This shows what is correct or incorrect for the work you have completed so far. It does not indicate completion. A 6-year maturity bond with face value of $1,000 makes annual coupon payments of $88 and is selling at face value. What will be the rate of return on the bond if its yield to maturity at the end of the year is: (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.) 8 Answer is complete but not entirely correct. Rate of Return a. b. 16% 18.8% 880@ % 10.8%Explanation / Answer
Ans.A Price = (1000 + 88) / (1+0.06) 1088 / 1.06 1026.415 Rate of return = [88 + (1026.42 - 1000)]/1000 114.42 1000 0.11442 OR 11.42% Ans.c Price = (1000 + 88) / (1+0.108) 1088 / 1.108 981.9495 Rate of return = [88 + (981.9495 - 1000)]/1000 69.9495 / 1000 0.06995 OR 6.995% OR 7%