Four years ago, Nancy Stills bought six-year, 5

Business Apr 25, 2021

Four years ago, Nancy Stills bought six-year, 5.1 percent coupon bonds issued by the Blossom Corp. for $948.84. If she sells these bonds at the current price of $896.32, what will be her realized yield on the bonds? Assume similar coupon-paying bonds make annual coupon payments. (Round intermediate calculations to 5 decimal places, e.g. 1.25145 and final answer to 2 decimal places, e.g. 15.25%.)

Realised rate of return __________%

Expert Solution

Computation of Realized Rate of Return using Rate Function in Excel:

=rate(nper,pmt,-pv,fv)

Here,

Rate = Realized Rate of Return = ?

Nper = 4 Years

PMT = $1,000*5.1% = $51

PV = Purchase Price = $948.84

FV = Sales Price = $896.32

Substituting the values in formula:

=rate(4,51,-948.84,896.32)

Rate or Realized Rate of Return = 4.07%

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