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    Return on bonds

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    1. What is the return on a 5 percent coupon bond that initially sells for $1,000 and sells for $900 next year?

    2. If a $12,000 coupon bond has a coupon rate of 8 percent, then the coupon payment every year is

    3. The current yield on a $5,000, 8 percent coupon bond selling for $4,000 is

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    Solution Preview

    1. What is the return on a 5 percent coupon bond that initially sells for $1,000 and sells for $900 next year?

    Selling price= $900
    Coupon payment = $50 =5%*1000
    Amount realized= $950 =900+50
    Initial investment= $1,000
    Therefore return on ...

    Solution Summary

    The solution calculates returns on investment in bonds, coupon payment every year and the current yield.

    $2.49

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