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An investor owned a 9 percent annual payment coupon bond for six years that was originally purchased at a 9

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An investor owned a 9 percent annual payment coupon bond for six years that was originally purchased at a 9 percent required return. She did not reinvest any coupons; she redeemed the bond at par.

a) What was her annual realized rate of return? 

b) What if she did reinvest the coupons but only earned 5 percent on each coupon? Why are your answers not equal to 9 percent?

Expert Answer:

Answer rating: 100% (QA)

a To calculate the annual realized rate of return we need to consider both the annual coupon payments and the capital gain or loss from the difference View the full answer


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Related Book For  answer-question
Foundations of Financial Management

Foundations of Financial Management

ISBN: 978-1259024979

10th Canadian edition

Authors: Stanley Block, Geoffrey Hirt, Bartley Danielsen, Doug Short, Michael Perretta

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Posted Date: August 24, 2023 07:02:22
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Design And Modeling Of Mechanical Systems IV Proceedings Of The 8th Conference On Design And Modeling Of Mechanical Systems CMSM 2019 2019 Edition - ISBN: 3030271455 - Free Book