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15 July, 10:49

A mortgage bond issued by Automation Engineering is for sale for $8,200. The bond has a face value of $10,000 with a coupon rate of 11% per year, payable monthly. What rate of return will be realized if the purchaser holds the bond to maturity 8 years from now

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  1. 15 July, 10:59
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    Person will get interest of 11% on 10000 that is 1100 per year or 91.66 per month.

    The future value of this annuity interest at 11% is 14014 after 8 years.

    After 8 years he will also get 10000

    Total amount he will be getting after 8 years

    = 10000 + 14014

    = 24014

    Annualised return with initial investment of 8200 with return of 24014 after 8 years, turns out to be 14.38 %
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Home » Engineering » A mortgage bond issued by Automation Engineering is for sale for $8,200. The bond has a face value of $10,000 with a coupon rate of 11% per year, payable monthly.
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