Personal Finance 1st Edition by Jack R. Kapoor

Exercise 27

Calculating Total Return. James McCulloch purchased a 30-year U.S. Treasury bond four years ago for $1,000. The bond paid 3.125 percent annual interest. Four years later he sold the bond for $1,040.

a. What is the annual interest amount for the bond?

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b. What is the total interest Mr. McCulloch earned during the four-year period?

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c. What is the total return for Mr. McCulloch’s bond investment

Step 1 of 3

b.

Calculation of Total Interest JMC earned during 4 Years period of Treasury bond:

The bonds are held for 4yrs, and hence the annual interest should be multiplied with 4 to find the total interest for 4yrs.