Exampleftsame the purchase of a lo-percent-Coupon Treasury bond at aprta of 960 , held one year and sold for 1,020

To determine the yield or return on the Treasury bond, we need to consider both the interest rate and the capital gain or loss from the purchase and sale of the bond.<br /><br />Given information:<br />- The bond has a coupon rate of 5%.<br />- The bond was held for one year.<br />- The bond was sold for $1,020.<br /><br />Step 1: Calculate the annual interest income from the bond.<br />Annual interest income = Coupon rate × Face value<br />Assuming the face value of the bond is $1,000:<br />Annual interest income = 5% × $1,000 = $50<br /><br />Step 2: Calculate the total interest earned over the one-year holding period.<br />Total interest earned = Annual interest income × Number of years<br />Total interest earned = $50 × 1 = $50<br /><br />Step 3: Calculate the capital gain or loss from the sale of the bond.<br />Capital gain or loss = Sale price - Purchase price<br />Assuming the purchase price of the bond was $1,000:<br />Capital gain or loss = $1,020 - $1,000 = $20<br /><br />Step 4: Calculate the total return on the bond.<br />Total return = Total interest earned + Capital gain or loss<br />Total return = $50 + $20 = $70<br /><br />Step 5: Calculate the yield or return on the bond.<br />Yield or return = Total return / Original investment<br />Yield or return = $70 / $1,000 = 7%<br /><br />Therefore, the yield or return on the Treasury bond held for one year and sold for $1,020 is 7%.