On February 2, 2016, an investor held some Province of Ontario stripped coupons in a self-administered RRSP at ScotiaMcLeod, an
investment dealer. Each coupon represented a promise to pay $100 at the maturity date on February 2, 2022, but the investor would
receive nothing until then. The value of the coupon showed as $76.29 on the investor's screen. This means that the investor was
giving up $76.29 on February 2, 2016, in exchange for $100 to be received just less than six years later.
a. Based upon the $76.29 price, what rate was the yield on the Province of Ontario bond? (Do not round intermediate calculations
and round your final answer to 2 decimal places.)
Rate of return
%
b. Suppose that on February 2, 2017, the security's price was $86.00. If an investor had purchased it for $76.29 a year earlier and sold
it on this day, what annual rate of return would she have earned? (Do not round intermediate calculations and round your
final answer to 2 decimal places.)
Annual rate of return
%
c. If an investor had purchased the security at the market price of $86.00 on February 2, 2017, and held it until it matured, what annual
rate of return would she have earned? (Do not round intermediate calculations and round your final answer to 2 decimal places.)
Annual rate of return
%
