suppose you bought a 6 percent coupon bond one year ago for $1,040. The bond sells for $1,063 today.
What is your question?
To calculate the annual coupon payment for the bond, we need to first determine the face value of the bond. The face value, also called the par value, is the amount that the bond will be worth at maturity. In this case, it is not mentioned, so we will assume it to be $1000.
Next, we can calculate the coupon payment by multiplying the face value by the coupon rate. The coupon rate is given as 6 percent, which means the bond will pay a 6 percent interest on its face value every year.
Coupon Payment = Face Value * Coupon Rate
Coupon Payment = $1000 * 6% = $60
Now, let's analyze the price change of the bond. The bond was bought for $1,040 one year ago and is currently selling for $1,063.
The increase in price of the bond represents the capital gain or loss. To determine the capital gain or loss percentage, we can use the following formula:
Capital Gain Percentage = (Selling Price - Purchase Price) / Purchase Price * 100
Capital Gain Percentage = ($1,063 - $1,040) / $1,040 * 100 = $23 / $1,040 * 100 = 2.21%
Therefore, the capital gain percentage on this bond is 2.21%.