Please show how to solve it using The financial calculator (Model: HP10BII). One year ago you...
Please show how to solve it using The financial calculator (Model: HP10BII).
One year ago you purchased a 30-year, 8% annual coupon bond at par. Today, you received the first coupon and sold the bond at a market rate of interest of 6%. What rate of return did you earn? A) 8% B) 19.12% C) 6% D) 22.13% *E) 35.18%.
Homework Answers
| we have to use financial calculator to solve this problem | |||
| First we have to compute the sales price | |||
| Put in calculator | |||
| FV | 1000 | ||
| PMT | 80 | ||
| I | 6% | ||
| N | 29 | ||
| Compute PV | ($1,271.81) | ||
| Therefore sales price = | $1,271.81 | ||
| interest received = | 80 | ||
| Total cash received = 1271.81+80 | $1,351.81 | ||
| Purchase price = | 1,000 | ||
| Net gain= | $351.81 | ||
| return % = 351.81/1000 | 35.18% | ||
| therefore correct answer is option E | 35.18% | ||
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