Consider a corporate bond that was purchased last year with a face value of $1,000, 8% annual coupon rate and a 15-year maturity. At the time of purchase, the bond had an expected yield to maturity of 9%. Calculate the rate of return that would have been earned for the past year if the bond was sold today for $924.23.

In order to use your financial calculator to solve for the rate of return on this bond, you need to know the following information:

NN:	the number of years before the bond matures
I/YI/Y:	the market rate of the interest on the bond
PVPV:	the present value of the bond
PMTPMT:	the dollars of interest paid each year
FVFV:	the par, or maturity, value of the bond

First, you must solve for the present value of the bond:

Complete the following table by selecting the appropriate values for N, I/YI/Y and PMTPMT. Then use your financial calculator to solve for the present value of the bond, and complete the final row of the table.

Input				1,000
Keystroke	N	I/Y	PMT	FV	PV
Output

Now you have all of the information needed to calculate the rate of return that would have been earned for the past year if the bond was sold today for $924.23:

P0P0:	the original bond price
P1P1:	the new bond price
PMTPMT:	the dollars of interest paid each year

This bond is trading at a to par value. Therefore, it has an expected capital over time.

According to the video, which of the following equations are used to calculate a bonds rate of return:

A. Rate of Return=P1P0+PMTP0Rate of Return=P1P0+PMTP0

B. Rate of Return=P0P1+PMTRate of Return=P0P1+PMT

C. Rate of Return=P1P0+PMTP1Rate of Return=P1P0+PMTP1

D. Rate of Return=P0P1+PMTP1Rate of Return=P0P1+PMTP1

If your friend sold the bond today for $924.23, what is the dollar return she would have earned this past year?

If your friend sold the bond today for $924.23, what is the rate of return she would have earned this past year?