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Q. Calculate Average Annual Return?
An investor buys a bond in 1978 maturity in 1980 at Rs.900. It has a maturity value of 10 years and par value of Rs. 1000. It fetches RS.90 every year. Calculate yield.
Solution:
Current Yield = Annual Cash Price 90, Purchase Price 900= 10%
Yield to Maturity = Average Annual Return Average Investment C=Annual Coupon P=Purchase of Price 1000 - 900
Average Annual Return = 90 +10= 100
Yield to Maturity = 100*100=10.5%
950
M= Maturity of par value of bond
N= Number of years remaining to maturity
Stock or Share
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