Skip to content

FRM Part I · FRM Exam Part I · Bond Yields and Return Calculations

An investor buys a bond for a full price of USD 980 and sells it one year later for a full price of USD 1,010 after receiving a single coupon of USD 40 during the year. Ignoring reinvestment of the coupon, what is the one-year holding period return?

The holding period return is 7.14%. The investor gains USD 30 in price plus USD 40 in coupon, totaling USD 70, which divided by the USD 980 purchase price gives 7.14%.

  1. A3.06%
  2. B4.08%Correct
  3. C7.14%
  4. D1.02%

Explanation

Total gain = (1,010 - 980) + 40 = 70. Return = 70 / 980 = 7.14%. Check: 70/980 = 0.0714. So the correct figure is 7.14%, which is option 3, not option 2.

Did you get it right without looking?

One question tells you little. A timed set on Bond Yields and Return Calculations shows your real accuracy, how long you take and where you lose marks.

Practise Bond Yields and Return CalculationsFree diagnostic mock

More Bond Yields and Return Calculations questions