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

Finance Dec 02, 2020

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

Expert Solution

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

Feel free to ask in case of any query relating to this question

Archived Solution

Unlocked Solution

You have full access to this solution. To save a copy with all formatting and attachments, use the button below.

Already a member? Sign In

Important Note: This solution is from our archive and has been purchased by others. Submitting it as-is may trigger plagiarism detection. Use it for reference only.

For ready-to-submit work, please order a fresh solution below.

Or get 100% fresh solution

Get Custom Quote