Question
On February 2, 2016, an investor held some Province of Ontario stripped coupons in a self-administered RRSP at ScotiaMcLeod, an investment dealer. Each coupon represented
On February 2, 2016, an investor held some Province of Ontario stripped coupons in a self-administered RRSP at ScotiaMcLeod, an investment dealer. Each coupon represented a promise to pay $100 at the maturity date on February 2, 2022, but the investor would receive nothing until then. The value of the coupon showed as $89.21 on the investors screen. This means that the investor was giving up $89.21 on February 2, 2016, in exchange for $100 to be received just less than six years later. |
a. | Based upon the $89.21 price, what rate was the yield on the Province of Ontario bond? (Do not round intermediate calculations and round your final answer to 2 decimal places.) |
Rate of return | % |
b. | Suppose that on February 2, 2017, the securitys price was $93.00. If an investor had purchased it for $89.21 a year earlier and sold it on this day, what annual rate of return would she have earned? (Do not round intermediate calculations and round your final answer to 2 decimal places.) |
Annual rate of return | % |
c. | If an investor had purchased the security at the market price of $93.00 on February 2, 2017, and held it until it matured, what annual rate of return would she have earned? (Do not round intermediate calculations and round your final answer to 2 decimal places.) |
Annual rate of return | % |
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