Respuesta :
Answer:
The correct answer to the following question will be "8%".
Explanation:
The given values are:
Number of years of maturity = 5 years
Interest rate of coupon = 10%
              = 10%×1000
              = 100
Yield to maturity, YTM = 8%
As we know,
Price of Bond = PV of Coupons + PV of Per Value
On putting the values in the above formula, we get
⇒           = [tex]\frac{100\times (1-(1+8 \ percent^{-5}))}{8 \ percent} +\frac{1000}{1+8 \ percent^{5}}[/tex]
⇒           = [tex]1079.85[/tex]
After 1 years, we get
Price of Bond = PV of Coupons + PV of Per Value
On putting the values in the above formula, we get
⇒           = [tex]\frac{100\times (1-(1+8 \ percent^{-4}))}{8 \ percent} +\frac{1000}{1+8 \ percent^{4}}[/tex]
⇒           = [tex]1066.24[/tex]
Now,
The total return rate = [tex]\frac{(1066.24-1079.85+100)}{1079.85}[/tex]
                  = [tex]\frac{86.39}{1079.85}[/tex]
                  = [tex]8 \ percent[/tex]
