You Purchased a 6% Annual Coupon Bond at Par and Sold

question 91

Multiple Choice

You purchased a 6% annual coupon bond at par and sold it one year later for $1,015.16. What was your rate of return on this investment if the face value at maturity was $1,000?

• A) 4.48%
• B) 6.15%
• C) 7.52%
• D)6.07%

Apply the effective interest method to compute interest expense and amortization of bond discount/premium.

Analyze the impact of bond premium or discount amortization on the carrying amount of bonds.

Understand the importance of actuarial information in determining the discount or premium of bonds.

Interpret the relationship between market interest rates, stated interest rates, and their impact on bond pricing and interest expense.