Answered

IDNLearn.com provides a user-friendly platform for finding and sharing accurate answers. Our platform provides accurate, detailed responses to help you navigate any topic with ease.

Timothy bought a bond with a face value of $1,000. The bond term is 1 year. He bought the bond at a 5 percent discount from the face value. The bond pays 5 percent annual interest, and Timothy will receive two semiannual payments. When the bond is redeemed at maturity, the total return (profit) will be $ .00. The total return on investment will be %. (Round return on investment percentage to one decimal place.)

Sagot :

Answer:

100, 10.5

Explanation:

1000 x .95= 950

1000x1.05=1050

1050-950= 100

100/950= 10.5

Anthougoidn

1. When the bond is redeemed at maturity, the total return (profit) for Timothy will be $100.00.

2. The total return on investment will be 10.5%.

What is the return on bonds?

The return on bonds is the profit gained from the purchase of the bonds.  

The profit includes all the capital gains (discount received) and interest revenues received until maturity.

Data ad Calculations:

Face value = $1,000

Purchase price = $950 ($1,000 x 1 - 5%)

Discount = $50 ($1,000 - $950)

Maturity period = 1 year

Coupon rate = 5%

Interest payment = semi-annual

Annual interest = $50 ($1,000 x 5%)

Total profit at maturity = $100 ($50 + $50)

Total return on investment = 10.5% ($100/$950 x 100)

Thus, when the bond is redeemed at maturity, the total return (profit) for Timothy will be $100.00 at 10.5%.

Learn more about bond returns at https://brainly.com/question/3077542

We greatly appreciate every question and answer you provide. Keep engaging and finding the best solutions. This community is the perfect place to learn and grow together. Your search for answers ends at IDNLearn.com. Thank you for visiting, and we hope to assist you again soon.