Asked by Christy Zavala on Apr 24, 2024
Verified
You purchased a bond for $900 one year ago. Today, you receive your only interest payment for the year of $100. The bond can currently be sold for $975. What is your total percentage return on investment? Ignore tax effects.
A) 8.3%
B) 11.1%
C) 18.0%
D) 19.4%
E) 23.8%
Total Percentage Return
A measure of the overall return on an investment, including both capital gains and dividends or interest, expressed as a percentage of the initial investment value.
Interest Payment
The payment made by a borrower to a lender as a form of compensation for the use of borrowed money.
Investment
The allocation of resources, such as capital, with the expectation of generating an income or profit.
- Estimate the total financial gains and percentage returns for multiple types of investments.
Verified Answer
SN
Stacy Nitch8 days ago
Final Answer :
D
Explanation :
The total return on investment combines the interest received and the capital gain. The interest received is $100, and the capital gain is $975 - $900 = $75. Therefore, the total return is $100 + $75 = $175. The percentage return on the initial investment of $900 is ($175 / $900) * 100% = 19.4%.
Learning Objectives
- Estimate the total financial gains and percentage returns for multiple types of investments.