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Homework answers / question archive / An investor purchased an NCD a year ago in the secondary market for $980,000

An investor purchased an NCD a year ago in the secondary market for $980,000

Finance

An investor purchased an NCD a year ago in the secondary market for $980,000. He redeems it today and receives $1,000,000. He also receives interest of $35,000. The investor's annualized yield on this investment is (2 Points) 4.89% 5.61% 6.17% 6.22% none of the above

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The yield is computed as shown below:

= (Redemption amount - Purchase amount + Interest amount) / Purchase amount

= ($ 1,000,000 - $ 980,000 + $ 35,000) / $ 980,000

= $ 55,000 / $ 980,000

= 5.61% Approximately

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