Calculating the annual return on a Junk bond
Not what you're looking for?
You purchase a high-yield, junk bond for $1,000 that pays $140 annually. After buying the bond, yields decline and you are able to reinvest the interest at only 9 percent. You reinvest all the interest payments. How much will you have when the bond is retired after 12 years? What was the annual return you earned on this investment?
Purchase this Solution
Solution Summary
The solution describes the steps to calculate annual return in the given case. Calculations are carried out with the help of functions in MS Excel.
Solution Preview
Please refer attached file for better clarity of expressions in MS Excel.
In this case all coupon payments of $140 are reinvested at the interest rate of 9%.
Now we calculate accumulated amount for these reinvestment of coupon ...
Education
- BEng (Hons) , Birla Institute of Technology and Science, India
- MSc (Hons) , Birla Institute of Technology and Science, India
Recent Feedback
- "Thank you"
- "Really great step by step solution"
- "I had tried another service before Brain Mass and they pale in comparison. This was perfect."
- "Thanks Again! This is totally a great service!"
- "Thank you so much for your help!"
Purchase this Solution
Free BrainMass Quizzes
Managing the Older Worker
This quiz will let you know some of the basics of dealing with older workers. This is increasingly important for managers and human resource workers as many countries are facing an increase in older people in the workforce
Introduction to Finance
This quiz test introductory finance topics.
Social Media: Pinterest
This quiz introduces basic concepts of Pinterest social media
Accounting: Statement of Cash flows
This quiz tests your knowledge of the components of the statements of cash flows and the methods used to determine cash flows.
Understanding Management
This quiz will help you understand the dimensions of employee diversity as well as how to manage a culturally diverse workforce.