Asked by Alejo Izaguirre on May 10, 2024
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In the last year, the market value of the Muirs' bonds has declined from $1040.25 to $1020.75 each, and the coupons paid $30 in interest semi-annually. Calculate the following:
a) Income yield.
b) Capital gain yield.
c) Rate of total return.
Capital Gain Yield
The rate of return on an investment based on the increase in its market value over the original purchase price, excluding dividends or interest.
Income Yield
The income return on an investment, typically expressed as a percentage of the investment’s cost or current market value.
Rate of Total Return
The percentage gain or loss on an investment over a specified period, considering both price appreciation and dividends or interest.
- Understand the concepts of income yield, capital gain yield, and total return in bond investments.
- Calculate the income yield on bond investments.
- Calculate the capital gain yield on bond investments.
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Learning Objectives
- Understand the concepts of income yield, capital gain yield, and total return in bond investments.
- Calculate the income yield on bond investments.
- Calculate the capital gain yield on bond investments.