A mortgage bond issued by Automation Engineer­ing is for sale for $8200. The bond has a face value of $10,000 with a coupon rate of 8% per year, pay­able annually. What rate of return will be realized if the purchaser holds the bond to maturity 5 years from now?

What will be an ideal response?


0 = -8200 + 10,000(0.08)(P/A,i*,5) + 10,000(P/F,i*,5)

Solve by trial and error or IRR function

i* = 13.1% per year (spreadsheet)

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