You bought the bond for $1,040, after 6 months you received a coupon of $35 and after another 6 months you received another $35 coupon and you sold the bond for $1,070. What would be your total dollar return in that case? What would be your total percentage return?
Would the total dollar return be $100 [(1070 – 1040)+35+35]?
Would the total percentage return 9.62% [[(1070 – 1040)+35+35]/1040]?
To calculate your total dollar return, you need to add up all the cash flows you received from the bond. In this case, you received two coupon payments of $35 each, so the total cash flow from the coupons is $35 + $35 = $70. Additionally, you sold the bond for $1,070, which is $30 more than what you paid for it. Therefore, the total dollar return would be [(1070 - 1040) + 35 + 35] = $100.
To calculate the total percentage return, you need to divide the total dollar return by the initial investment and express it as a percentage. In this case, your initial investment was $1,040. Therefore, the total percentage return would be [($100 / 1040) × 100] ≈ 9.62%.
So, yes, your calculations are correct. The total dollar return would be $100, and the total percentage return would be approximately 9.62%.