Answer:
5%
Explanation:
Formula for finding percentage return on this bond is;
Percentage return =[ (New price + income- Old price)/Old price ] *100
New price = 1,200
Income = coupon payment = 5% * par value = 5% *1000 = 50
Old Price = 1,000
Percentage return = [ (1,200 + 50 - 1,000)/ 1,000 ] *100
= 0.25 *100
= 25%
Return in one year is therefore 5%
