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There is an 12-year bond with a par of $1,000 and a coupon of 5.20%. Suppose the bond is bought today at a price of $1,032.60, and the market interest rate is 4.82%. It turns out that in 4 years an investor sells the bond at a price of $1,059.12. Calculate the annual realized return over the 4 years the investor held the bond. Show your work and explain. (8 points).

Respuesta :

The annual realised return over the four years is 5.63%

What is the  annual realised return?

The  annual realised return is the total return earned from holding the bond given its coupon payments, purchase price and the price at which it was sold.

The  annual realised return can be determined using a financial calculator:

  • Cash flow in year 0 = -1032.60
  • Cash flow each year from year 1 to 4 = 5.20% x 1000 = $52
  • Cash flow in year 4 = $1059.12

annual realised return = 5.63%

To learn more about bond yield, please check: https://brainly.com/question/27287677

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