Solution-Promised effective annual return

Promised effective annual return

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Reference no: EM133071972

On January 1, 2020 you purchased the following Canadian tire bond:

	Coupon	Deadline	Price	Yield
Canadian tire	8	September 15/2025	109.47	6

a) At what price did you buy this bond?

b) Some time later, on March 15, 2020, you sold this bond. On that day, the bond was listed as follows:

	Coupon	Deadline	Price	Yield
Canadian tire	8	September 15/2025	-	7

At what price would you have sold it?

c) What then is the effective annual return on this investment?

d) What was the promised effective annual return on this bond on the day you bought it? e) Why is the return achieved different from the return promised at the time of purchase?

Reference no: EM133071972

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Promised effective annual return

Reference no: EM133071972

Reference no: EM133071972

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