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You Purchased an Apple Incorporated bond one year ago for $932.75. This bond pays a semi-annual...

You Purchased an Apple Incorporated bond one year ago for $932.75. This bond pays a semi-annual coupon at 7% rate. Today this Apple Inc bond sells for $988.50, and as of today this bond has 15 years left to maturity. If you sell this bond today, what is your realized rate of return from the time you purchased it until today (coupon yield plus capital gain)?

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Answer #1

Face Value = $1,000

Annual Coupon Rate = 7.00%
Annual Coupon = 7.00% * $1,000
Annual Coupon = $70

Purchase Price = $932.75
Selling Price = $988.50

Realized Return = (Selling Price + Annual Coupon - Purchase Price) / Purchase Price
Realized Return = ($988.50 + $70 - $932.75) / $932.75
Realized Return = $125.75 / $932.75
Realized Return = 0.1348 or 13.48%

So, your realized return is 13.48%

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