Rate of return on bonds
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Rate of Return. A 2-year maturity bond with face value $1,000 makes annual coupon payments of $80 and is selling at face value. What will be the rate of return on the bond if its yield to maturity at the end of the year is
a. 6 percent
b. 8 percent
c. 10 percent
Please provide in Excel format.
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Solution Summary
The solution explains how to calculate the rate of return on a bond.
Solution Preview
In this problem, we have to find the market price at the end of the year to arrive at the rate of return.
At the end of the year, the bond would have only one year left. The price calculation are in the attached excel file. ...
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