Calculating Returns on a 7% Coupon Bond Investment: A Financial Math Problem

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SUMMARY

The discussion focuses on calculating returns for a 7% coupon bond purchased for $893, which now sells for $918, with a face value of $1,000. The total dollar return over the past year is $125, calculated as the difference between the selling price and the purchase price plus the coupon payment. The nominal rate of return is 14%, derived from the total dollar return divided by the initial investment. After accounting for a 4% inflation rate, the total real rate of return is 9.62%, calculated using the formula for real return adjustment.

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  • Knowledge of nominal vs. real interest rates
  • Basic grasp of inflation impact on investments
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  • Learn about the impact of inflation on investment returns
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Investors, financial analysts, and students studying fixed-income securities who seek to understand bond return calculations and the effects of inflation on investment performance.

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calculating returns:
suppose you bought a 7 percent coupon bond one year ago for $893. the bond sells for $918 today.
a. assuming a $1000 face value, what was your total dollar return on this investment over the past year.
b.what was your total nominal rate of return on this investment over the past yr.
c.if inflation rate last year was 4 percent, what was your total real rate of return on this investment?

can someone help solve this problem
 
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dragonfly1 said:
calculating returns:
suppose you bought a 7 percent coupon bond one year ago for $893. the bond sells for $918 today.
a. assuming a $1000 face value, what was your total dollar return on this investment over the past year.
b.what was your total nominal rate of return on this investment over the past yr.
c.if inflation rate last year was 4 percent, what was your total real rate of return on this investment?

can someone help solve this problem
Being that you are new to this forum, you might not have had a chance to look at the Rules.

In the section on homework help, it says that you must make an effort at solving the problem you post before anyone can give you any help. You should also include relevant formulas.
 

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