The market value of the Gamma bond is $950 and the market interest rates are as follows:

12% 10% 11% 14%

X-------------- X ------------------ X------------------ X---------------- X---

0 1year 2 year 3 year 4 year

P4= 900 $

The expected price of the bond in 4 years is $900. The coupon rate of the bond is 10%.

You are asked to calculate the realized rate of return on this bond given that its face value is $1000.

Explain what the concept of realized rate is.