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27 August, 20:53

One year ago, you purchased a 7 percent coupon bond with a face value of $1,000 when it was selling for 102.5 percent of par. Today, you sold this bond for 104 percent of par. What is your total dollar return on this investment?

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  1. 27 August, 23:31
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    Total Dollar return on Investment = $85

    Explanation:

    Coupon rate = 7%

    Coupon Payment ($1,000*7%) = $70

    Selling Price of the bond ($1,000*102.5) = $1025

    Today's selling price of the bond ($1,000*104%) = $1,040

    $1,040 - $1025 + $70 = $85

    Total Dollar return on Investment = $85
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