You are considering purchasing a bond that pays annual interest of $50 per $1,000 of par value.

Question:

You are considering purchasing a bond that pays annual interest of $50 per $1,000 of par value. The bond matures in one year, and at that time you will collect the par value and the interest payment. If you can purchase this bond for $950, what is the holding period return?

Par Value
Par value is the face value of a bond. Par value is important for a bond or fixed-income instrument because it determines its maturity value as well as the dollar value of coupon payments. The market price of a bond may be above or below par,...