On June 1st, 2020, Coca Cola (KO) issued bonds for one billion dollars. The bonds have a par value of $1,000, coupon rate of 2.75% payable semiannually, and 40 years maturity (maturity date: 6/1/2060). What is the average annual return for an investor who purchased these bonds at launch (6/1/20) for $970.30 and sold them three years later (6/1/23) for $681.83? HINT: Don’t divide HPR/3. Consider the effects of compounding. Find the annual interest rate that would make the initial investment of $970.30 become $681.83 after three years. -9.90% per year. -9.50% per year. -0.95% per year. +9.90% per year.

On June 1st, 2020, Coca Cola (KO) issued bonds for one billion dollars. The bonds have a par value of $1,000, coupon rate of 2.75% payable semiannually, and 40 years maturity (maturity date: 6/1/2060). What is the average annual return for an investor who purchased these bonds at launch (6/1/20) for $970.30 and sold them three years later (6/1/23) for $681.83? HINT: Don’t divide HPR/3. Consider the effects of compounding. Find the annual interest rate that would make the initial investment of $970.30 become $681.83 after three years. -9.90% per year. -9.50% per year. -0.95% per year. +9.90% per year.

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter6: Fixed-income Securities: Characteristics And Valuation

Section: Chapter Questions

Problem 13P

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