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What Is the Rate of Return for an Investor Who

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What is the rate of return for an investor who pays $1,054.47 for a 3-year bond with a 7% coupon and sells the bond 1 year later for $1,037.19?


Definitions:

Present Value

The current worth of a future sum of money or stream of cash flows given a specified rate of return, used in discounting and investment appraisal.

Annuity

A fiscal tool that disburses a set sequence of payments to a person, frequently serving as a financial income for retirees.

Equal Payments

Regular payments of the same amount, typically used in the context of loans or amortization schedules.

Present Value Factor

A multiplier used in calculating the present value of a future amount of money or stream of cash flows given a specific discount rate.

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