Total Return

[ChadWOB]

David,

Quick question that you'll be explain to very easily I imagine. When I'm calculating the purchase price and subsequent sale, I'm getting wrong numbers.For example (taken from a Schweser question):

Assume I'm selling my position; if the principal balance is $8,894,900 and the bond price is 100 20/32 what are my proceeds?

This is rookie level stuff, but not sure what I'm missing?

 

[David Harper CFA FRM]

Hi Chad, it's price per $100 in face value (principal balance), so you want 101.625/100 * 8,894,900 = $9,039,442. Which isn't "return" but simply current price or value (or proceeds) of the position, but can't get a "return" from only one data point. But please do let me know if i am wrong, i am here to tell you, rookie stuff is definitely the hardest

 

[ChadWOB]

They have 20/32 = .625, so bond price 100.625. I was missing the step of 100.625/100 = 1.00625. This number times the principal value of 8,894,900 gives me the proceeds of $8,950,493 I am looking for.

Thanks!

 

[David Harper CFA FRM]

right, thanks, i mistakenly read 101 20/32